Subsidiary Corporation purchases a used machine from Parent Corporation in an intercompany transaction. Which of the following events is a corresponding event for the intercompany transaction?
A)the purchasing group member depreciating the machine
B)the purchasing group member selling the machine for cash to a nonmember of the group
C)the departure of the purchasing group member from the affiliated group when its stock is sold to a nonmember of the group
D)All of the above are recognition events.

Question

Quizplus · Accepted Answer

All of the options listed are recognition events for the intercompany transaction. When a subsidiary purchases a machine from its parent corporation, the subsequent depreciation of the machine by the subsidiary (A), the sale of the machine to a nonmember (B), and the departure of the subsidiary from the affiliated group (C) are all events that would require recognition and adjustment in the consolidated financial statements to eliminate intercompany transactions and balances.

Subsidiary Corporation Purchases a Used Machine from Parent Corporation in an Intercompany