_____ Which of the following statements is true?
A) Elimination by rearrangement is mandatory under current GAAP.
B) Intercompany inventory transfers at cost do not have to be eliminated.
C) If an intercompany inventory transfer is made in late 2004 but the inventory is not resold to an outside, third party until 2005, the intercompany inventory sale must also be eliminated in 2005.
D) Downstream intercompany inventory sales do not have to be eliminated if the subsidiary is 100% owned.
E) None of the above.

Question

Quizplus · Accepted Answer

Under current GAAP, all intercompany transactions, including inventory transfers, must be eliminated in the consolidation process, regardless of whether the transfer was at cost, the timing of the resale to a third party, or the ownership percentage of the subsidiary. This ensures that the consolidated financial statements present the financial position and results of operations of the parent and its subsidiaries as if they were a single economic entity.

_____ Which of the Following Statements Is True