When there are intercompany sales of inventory during the year and a three-part consolidation workpaper is prepared,elimination entries related to the intercompany sales: I.Always are needed.
II)Are not needed if all the inventory is resold to unrelated parties prior to the end of the year.

Question

Quizplus · Accepted Answer

Elimination entries related to intercompany sales are always needed in a three-part consolidation workpaper regardless of whether all the inventory is resold to unrelated parties prior to the end of the year or not. This is because intercompany sales are not considered valid revenue transactions and can lead to double counting of revenues if not eliminated. Therefore, option A is the correct answer.

When There Are Intercompany Sales of Inventory During the Year