Question 1

A method of preparing a consolidation worksheet that minimizes the number of elimination entries is called __________________________________________.

Accepted Answer

The answer of A method of preparing a consolidation worksheet...

Question 2

_____ The IRS's transfer pricing rules do not apply to

Accepted Answer

A)  Intercompany inventory transfers. 
B)  Intercompany equipment transfers. 
C)  Intercompany patent charges. 
D)  Intercompany management fee charges. 
E)  None of the above. 
A)  Intercompany inventory transfers. 
B)  Intercompany equipment transfers. 
C)  Intercompany patent charges. 
D)  Intercompany management fee charges. 
E)  None of the above.

Question 3

Inventory sales from a parent to one of its subsidiaries are called _______________ sales.

Accepted Answer

The answer of Inventory sales from a parent to one...

Question 4

Because all intercompany transactions are eliminated in consolidation, the use of improper or unfair transfer prices has no consequences for consolidated reporting purposes.

Accepted Answer

A) True 
 B)False

Question 5

_____ Which of the following accounts would require reconciliation or adjustment to a reciprocal balance prior to beginning the consolidation process?

Accepted Answer

A)  Intercompany Dividend Income (when the parent uses the cost method). 
B)  Intercompany Sales. 
C)  Intercompany Cost of Sales. 
D)  Long-term Intercompany Payable. 
E)  None of the above. 
A)  Intercompany Dividend Income (when the parent uses the cost method). 
B)  Intercompany Sales. 
C)  Intercompany Cost of Sales. 
D)  Long-term Intercompany Payable. 
E)  None of the above.

Question 6

_____ Which of the following statements is true?

Accepted Answer

A)  All intercompany transactions are related-party transactions. 
B)  All related-party transactions are intercompany transactions. 
C)  An unsupportable, artificially high or low intercompany transfer price with an overseas unit cannot have any impact on the consolidated financial statements because all intercompany transactions are eliminated in consolidation. 
D)  For income tax-reporting purposes, transfer prices need not be comparable to sales to outside, third parties. 
E)  None of the above. 
A)  All intercompany transactions are related-party transactions. 
B)  All related-party transactions are intercompany transactions. 
C)  An unsupportable, artificially high or low intercompany transfer price with an overseas unit cannot have any impact on the consolidated financial statements because all intercompany transactions are eliminated in consolidation. 
D)  For income tax-reporting purposes, transfer prices need not be comparable to sales to outside, third parties. 
E)  None of the above.

Question 7

All intercompany transactions are __________________________________ transactions.

Accepted Answer

The answer of All intercompany transactions are __________________________________ transactions....

Question 8

All intercompany transactions generally are related-party transactions.

Accepted Answer

A) True 
 B)False

Question 9

_____ A parent and its subsidiary file a consolidated income tax return. The subsidiary issues separate financial statements. The subsidiary's income statement

Accepted Answer

A)  Need not include income tax expense. 
B)  May include income tax expense calculated as if the subsidiary had filed a separate income tax return. 
C)  May include income tax expense allocated on an arbitrary and reasonable basis by the parent. 
D)  Both b and c. 
E)  None of the above. 
A)  Need not include income tax expense. 
B)  May include income tax expense calculated as if the subsidiary had filed a separate income tax return. 
C)  May include income tax expense allocated on an arbitrary and reasonable basis by the parent. 
D)  Both b and c. 
E)  None of the above.

Question 10

Intercompany transactions are usually recorded in ____________________________ accounts.

Accepted Answer

The answer of Intercompany transactions are usually recorded in ____________________________...

Question 11

_____ Which of the following accounts would not require reconciliation or adjustment to a reciprocal balance prior to beginning the consolidation process?

Accepted Answer

A)  Intercompany Receivables. 
B)  Intercompany Interest Income. 
C)  Intercompany Sales. 
D)  Intercompany Management Fee Income. 
A)  Intercompany Receivables. 
B)  Intercompany Interest Income. 
C)  Intercompany Sales. 
D)  Intercompany Management Fee Income.

Question 12

_____ Which of the following ratios is of very limited usefulness in comparing a parent with a subsidiary when each has a different capital structure?

Accepted Answer

A)  Net Income/Total Assets. 
B)  Net Income/Stockholders' Equity. 
C)  Operating Income/Total Assets. 
D)  Operating Income/Invested Capital (Long-term Debt and Stockholders' Equity). 
A)  Net Income/Total Assets. 
B)  Net Income/Stockholders' Equity. 
C)  Operating Income/Total Assets. 
D)  Operating Income/Invested Capital (Long-term Debt and Stockholders' Equity).

Question 13

_____ Which of the following accounts need not be eliminated in consolidation?

Accepted Answer

A)  Intercompany Sales. 
B)  Intercompany Cost of Sales. 
C)  Intercompany Interest Expense. 
D)  Long-term Intercompany Receivables. 
E)  None of the above. 
A)  Intercompany Sales. 
B)  Intercompany Cost of Sales. 
C)  Intercompany Interest Expense. 
D)  Long-term Intercompany Receivables. 
E)  None of the above.

Question 14

When unrealized intercompany profit is deferred for consolidated reporting purposes, it is also necessary to defer any ___________________________________ that have been recorded on that profit.

Accepted Answer

The answer of When unrealized intercompany profit is deferred for...

Question 15

_____ Which of the following statements is the correct reason for eliminating intercompany transactions for consolidated reporting purposes?

Accepted Answer

A)  Intercompany transactions are related-party transactions. 
B)  From the perspective of either of the individual companies, intercompany transactions are not bonafide transactions. 
C)  It is often impractical and in many cases impossible to determine whether the transfer prices approximate prices that could have been obtained with outside, independent parties. 
D)  The parent company could manipulate the intercompany transfer prices in a manner that is not equitable to the subsidiary. 
E)  None of the above. 
A)  Intercompany transactions are related-party transactions. 
B)  From the perspective of either of the individual companies, intercompany transactions are not bonafide transactions. 
C)  It is often impractical and in many cases impossible to determine whether the transfer prices approximate prices that could have been obtained with outside, independent parties. 
D)  The parent company could manipulate the intercompany transfer prices in a manner that is not equitable to the subsidiary. 
E)  None of the above.

Question 16

_____ In consolidation, the most efficient way to eliminate intercompany accounts that are to have reciprocal balances is to use

Accepted Answer

A)  Elimination by proxy. 
B)  Elimination by rearrangement. 
C)  Elimination by default. 
D)  Elimination by reciprocity. 
E)  None of the above. 
A)  Elimination by proxy. 
B)  Elimination by rearrangement. 
C)  Elimination by default. 
D)  Elimination by reciprocity. 
E)  None of the above.

Question 17

All related-party transactions are intercompany transactions.

Accepted Answer

A) True 
 B)False

Question 18

_____ In consolidation, which of the following intercompany transactions need not be undone?

Accepted Answer

A)  Intercompany management charges. 
B)  Intercompany lease income and expense. 
C)  Intercompany dividend income (when the parent uses the cost method). 
D)  Intercompany equipment transfers involving a gain or loss. 
E)  None of the above. 
A)  Intercompany management charges. 
B)  Intercompany lease income and expense. 
C)  Intercompany dividend income (when the parent uses the cost method). 
D)  Intercompany equipment transfers involving a gain or loss. 
E)  None of the above.

Question 19

Not all _______________________-party transactions are intercompany transactions.

Accepted Answer

The answer of Not all _______________________-party transactions are intercompany transactions....

Question 20

Under current GAAP, elimination by rearrangement is mandatory.

Accepted Answer

A) True 
 B)False

Exam 8: Introduction to Intercompany Transactions

A method of preparing a consolidation worksheet that minimizes the number of elimination entries is called __________________________________________.

_____ The IRS's transfer pricing rules do not apply to

Inventory sales from a parent to one of its subsidiaries are called _______________ sales.

Because all intercompany transactions are eliminated in consolidation, the use of improper or unfair transfer prices has no consequences for consolidated reporting purposes.

_____ Which of the following accounts would require reconciliation or adjustment to a reciprocal balance prior to beginning the consolidation process?

_____ Which of the following statements is true?

All intercompany transactions are __________________________________ transactions.

All intercompany transactions generally are related-party transactions.

_____ A parent and its subsidiary file a consolidated income tax return. The subsidiary issues separate financial statements. The subsidiary's income statement

Intercompany transactions are usually recorded in ____________________________ accounts.

_____ Which of the following accounts would not require reconciliation or adjustment to a reciprocal balance prior to beginning the consolidation process?

_____ Which of the following ratios is of very limited usefulness in comparing a parent with a subsidiary when each has a different capital structure?

_____ Which of the following accounts need not be eliminated in consolidation?

When unrealized intercompany profit is deferred for consolidated reporting purposes, it is also necessary to defer any ___________________________________ that have been recorded on that profit.

_____ Which of the following statements is the correct reason for eliminating intercompany transactions for consolidated reporting purposes?

_____ In consolidation, the most efficient way to eliminate intercompany accounts that are to have reciprocal balances is to use

All related-party transactions are intercompany transactions.

_____ In consolidation, which of the following intercompany transactions need not be undone?

Not all _______________________-party transactions are intercompany transactions.

Under current GAAP, elimination by rearrangement is mandatory.

Wholly Owned Subsidiaries: at Date of Creation

Wholly Owned Subsidiaries: Postcreation Periods

Partially Owned Created Subsidiaries & Variable Interest Entities

Introduction to Business Combinations

The Purchase Method: at Date of Acquisition-100 Ownership

The Purchase Method: Postacquisition Periods and Partial Ownerships

New Basis of Accounting

Intercompany Inventory Transfers

Intercompany Fixed Asset Transfers & Bond Holdings

Changes in a Parents Ownership Interest, Statement of Cash Flows, & Earnings Per Share

Reporting Segment and Related Information

International Accounting Standards & Translating Foreign Currency Transactions

Using Derivatives to Manage Foreign Currency Exposures

Translating Foreign Currency Statements: The Current Rate Method

Translating Foreign Currency Statements: The Temporal Method and the Functional Currency Concept

Interim Period Reporting

Securities and Exchange Commission Reporting

Bankruptcy Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Changes in Ownership

Partnerships: Liquidations

Estates and Trusts

Governmental Accounting: Basic Principles and the General Fund

Governmental Accounting: The Special-Purpose Funds and Special General Ledger

Not-For-Profit Organizations: Introduction and Private Npos

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