Kordel Inc.acquired 75% of the outstanding common stock of Raxston Corp.Raxston currently owes Kordel $500,000 for inventory acquired over the past few months.In preparing consolidated financial statements, what amount of Raxston's liability should be eliminated?
A) $375,000
B) $125,000
C) $300,000
D) $500,000
E) $0.

Question

Quizplus · Accepted Answer

In consolidated financial statements, intercompany transactions and balances are eliminated in full. Therefore, the entire $500,000 liability that Raxston owes to Kordel should be eliminated.