Exam 8: Introduction to Intercompany Transactions

Intercompany transactions can occur between an investor company and a company in which the investor owns 25% of the investee's outstanding common stock.

Under Section 482 of the U.S. Internal Revenue Code, the pricing for related-party transactions must be at _________________________________.

_____ For which of the following accounts would it be inappropriate to use elimination by rearrangement?

The IRS's 20% penalty for transfer pricing adjustments during a year that exceed $10 million of taxable income are not tax deductible.

_____ Which of the following statements is false?

Inventory sales from a subsidiary to its parent are called _______________________ sales.

Intercompany transactions are eliminated in consolidation because they are related-party transactions.

Under Section 482 of the U.S. Internal Revenue Code, the pricing of intercompany transactions must be at an arm's-length basis.

Inventory sales from a parent to one of its subsidiaries are referred to as downstream sales.

The term intercompany transaction generally is restricted to control situations.

Under Section 482 of the U.S. Internal Revenue Code, the details of transactions are ignored and taxable profit is determined by allocating shares of the total profit.

_____ Intercompany inventory transfers cannot be

_____ Which of the following statements is false?

For the income statement, reciprocal account balances do not exist for all types of intercompany transactions.

An intercompany transaction is an arm's-length transaction if the transfer price is the same price charged to a(n) __________________________ party.

For income tax-reporting purposes, transfer prices for intercompany transactions must be ___________________________.

_____ Intercompany accounts that are to have reciprocal balances but are not currently in agreement are adjusted

The IRS's 20% and 40% penalties for transfer pricing adjustments that exceed $10 and $20 million, respectively, are _______________________________________ for tax-reporting purposes.

The Intercompany Sales account is an example of an account that would always have a reciprocal balance.

_____ Which of the following statements is true?