Intercompany sales must be eliminated from both the sales and cost of goods sold accounts in order to avoid double-counting and misrepresentation of consolidated financial statements. This ensures that the records accurately reflect transactions with external third parties.

Solved

Intercompany Sales

Question 77

Multiple Choice

Intercompany sales

A) do not need to be eliminated as long as the sales have been completed to an outside party.
B) must be eliminated from both the sales and cost of goods sold accounts.
C) do not need to be eliminated if made at arm's length values.
D) must be eliminated only if not in the ordinary course of trade or business.
E) do not need to be eliminated.

Correct Answer: