The following accounts were noted in reviewing the trial balance for Parent Co. and Subsidiary Corp.:
Assets under Construction
Contracts Receivable
Billings on Construction in Progress
Earned Income on Long-Term Contracts
Contracts Payable
If these accounts pertain to a contract where Subsidiary Corp. is building an asset for Parent Co., which of these accounts do you expect to eliminate when producing Parent Co. consolidated financial statements?

Question

Quizplus · Accepted Answer

All intercompany receivables and debt (Contracts Receivable, Contracts Payable and Billing on Construction in Progress) should be eliminated, as well as any intercompany profit (Earned Income on Long-Term Contracts), which will be deferred and recognized through depreciation adjustments in subsequent years.

The Following Accounts Were Noted in Reviewing the Trial Balance