Schiff Company owns 100% of the outstanding common stock of the Viel Company.During 2016, Schiff sold merchandise to Viel that Viel, in turn, sold to unrelated firms.There were no such goods in Viel's ending inventory.However, some of the intercompany purchases from Schiff had not yet been paid.Which of the following amounts will be incorrect in the consolidated statements if no adjustments are made?
A)inventory, accounts payable, net income
B)inventory, sales, cost of goods sold, accounts receivable
C)sales, cost of goods sold, accounts receivable, accounts payable.
D)accounts receivable, accounts payable

Question

Schiff Company owns 100% of the outstanding common stock of the Viel Company.During 2016, Schiff sold merchandise to Viel that Viel, in turn, sold to unrelated firms.There were no such goods in Viel's ending inventory.However, some of the intercompany purchases from Schiff had not yet been paid.Which of the following amounts will be incorrect in the consolidated statements if no adjustments are made?​
A)​inventory, accounts payable, net income
B)​inventory, sales, cost of goods sold, accounts receivable
C)​sales, cost of goods sold, accounts receivable, accounts payable.
D)​accounts receivable, accounts payable

Quizplus · Accepted Answer

Intercompany sales and cost of goods sold need to be eliminated to avoid double counting in consolidated statements. Accounts receivable and accounts payable related to intercompany transactions also need adjustments.

Schiff Company Owns 100% of the Outstanding Common Stock of the Viel