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    Intercompany Journal Entries

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

    I need help understanding how these work. If one division sells another division 50 pc of equipment and records postage and depreciation on the items, how does the receiving division record the entry? I don't think they would be concerned with postage and depreciation on the receiving end - just a straight receipt, correct?

    For example:

    shipping entry:

    Item 1000 - 3000
    postage 50
    depreciation 650
    rec co. 2300

    receiving entry: ???

    I think

    shipping co 2300
    item 1000 2300

    © BrainMass Inc. brainmass.com December 24, 2021, 10:56 pm ad1c9bdddf
    https://brainmass.com/business/the-accounting-cycle/intercompany-journal-entries-520723

    SOLUTION This solution is FREE courtesy of BrainMass!

    Hi there,

    When companies supply each other, it is generally determined that the receiving company will pay ALL costs relating to the purchase from the shipping company. In the case above, the receiving company would pay ALL costs incurred by the shipping company. Typically, the shipping company would not make a profit and incur any expense from supplying to the receiving company.

    In the case above, I am not sure what depreciation expense would be. If it is not related solely to the product being shipped, then it would not be included. However the postage would be included in the cost to the receiver.
    Without depreciation the cost to the receiver would be 2350, which is 3000 less depreciation of 650.

    Of course, the terms of transfer cost would be agreed in advance and can be any form of agreement.

    Hope this helps,

    Paul Cerisano MBA, MEd

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

    © BrainMass Inc. brainmass.com December 24, 2021, 10:56 pm ad1c9bdddf>
    https://brainmass.com/business/the-accounting-cycle/intercompany-journal-entries-520723

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