Explore BrainMass
Share

Explore BrainMass

    Inventory Transfers to Related Companies

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Why must inventory transfers to related companies be eliminated in preparing consolidated financial statements? Why is there need for an eliminating entry when an inter-company inventory transfer is made at cost? Explain.

    © BrainMass Inc. brainmass.com October 10, 2019, 6:34 am ad1c9bdddf
    https://brainmass.com/business/inventory-management/inventory-transfers-related-companies-548831

    Solution Preview

    Inventory transfers to related companies have to be eliminated in preparing consolidated financial statements because if they are left on the financial statements, the cost of goods sold and the revenue for the consolidated statements will both be overstated. The reason is because the inventory transfer is not a purchase ...

    Solution Summary

    This solution explains why inventory transfers to related companies must be eliminated when preparing the consolidated financial statements. This solution also explains why there is a need for an eliminating entry when an inter-company inventory transfer is made at cost.

    $2.19