If an intercompany inventory transfer occurs in late 2005 and all this inventory is not resold to an outside, third party until 2006, the intercompany sale is eliminated in consolidation in 2005 and 2006.

Question

Quizplus · Accepted Answer

The intercompany sale is eliminated in consolidation in 2005, the year the transfer occurred, to prevent overstatement of consolidated revenue and assets. However, it is not eliminated in 2006 because the inventory has been sold to an outside party, making the transaction external and valid for consolidation purposes in that year.

If an Intercompany Inventory Transfer Occurs in Late 2005 and All