The existence of a related party transaction may be indicated when another entity
A) Sells real estate to the corporation at a price that is comparable to its appraised value.
B) Absorbs expenses of the corporation under audit.
C) Borrows from the corporation at a rate of interest which equals the current market rate.
D) Lends to the corporation at a rate of interest which equals the current market rate.

Question

Quizplus · Accepted Answer

When another entity absorbs expenses of the corporation under audit, it indicates that there is a related party transaction. This is because the other entity is willing to incur the expenses of the corporation as if they are their own, which may suggest a connection or relationship between the two parties. Options A, C, and D do not necessarily indicate the existence of a related party transaction as they are all transactions that can occur between unrelated parties as well.

The Existence of a Related Party Transaction May Be Indicated