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Consolidation Related Questions & Intercompany Transactions

** Please see attached EXCEL file for complete details. **

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Hello Student,

Before you begin to answer these three questions, you may want to note certain general information as it relates to intercompany transactions. You need to understand firstly, what intercompany transactions are; secondly, what the different types of intercompany transactions are; third, the directions in which intercompany transactions may flow (that is, upstream and downstream) and the differences between them; as well as, the entries required to eliminate intercompany transactions for consolidation purposes. Understanding the differences between upstream and downstream intercompany transactions is very important especially when preparing elimination entries. Note the following excerpts below (taken from http://www.wiley.com/college/bline/0471327751/samplechapter/ch04.pdf) which relates to the first three items above that you need to understand:

What are intercompany transactions? - "An intercompany transaction occurs when one unit of an entity is involved in a transaction with another unit of the same entity. While these transactions ...

Solution Summary

This solution provides you with information related mainly to intercompany transactions. You are provided with information related to what intercompany transactions are; what the different types of intercompany transactions are; and, the directions in which intercompany transactions may flow (that is, upstream and downstream) and the differences between them; as well as, information is provided related to the entries required to eliminate intercompany transactions for consolidation purposes. Responses to a set of questions are also given which can be used to under how intercompany transactions works (examples).

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