Intercompany debt that must be eliminated from consolidated financial statements may result from:

Question

Quizplus · Accepted Answer

All of the scenarios mentioned in options A, B, and C involve intercompany debt that must be eliminated from the consolidated financial statements. In option A, one member of a consolidated group directly sells its bonds to another member, which results in the elimination of the intercompany debt. In option B, one member advances funds to another member to retire the bonds it had issued to outside parties, which leads to intercompany debt that must be eliminated. Option C involves a member of the group purchasing bonds from outside parties, issued by another member of the group, which leads to the elimination of the intercompany debt when preparing consolidated financial statements. Therefore, all the options result in intercompany debt that must be eliminated from the consolidated financial statements.

Intercompany Debt That Must Be Eliminated from Consolidated Financial Statements