Schiff Company owns 100% of the outstanding common stock of the Viel Company. During 20X1, 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?

Question

Quizplus · Accepted Answer

When consolidating affiliates are engaged in intercompany merchandise sales, the following procedures must be taken:
1. Intercompany sales must be eliminated to avoid double counting.
 11eb11de_931c_76f1_ad38_c93004ab53d6_TB2014_00 2. Internal debt must be eliminated. 11eb11de_931c_9e02_ad38_6f3d6f52346f_TB2014_00 "3. No profit on intercompany sales may be recognized until the profit is realized by a sale
to a third party. This is not applicable in this case since all of the inventory has been sold."

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