Kordel Inc.holds 75% of the outstanding common stock of Raxston Corp.Raxston currently owes Kordel $500,000 for inventory acquired over the past few months.In preparing consolidated financial statements,what amount of this debt should be eliminated?

Question

Quizplus · Accepted Answer

In consolidated financial statements, intercompany transactions and balances are eliminated in full. Since Kordel Inc. holds 75% of Raxston Corp., the entire $500,000 debt owed by Raxston to Kordel should be eliminated.