Which of the following would not likely be classified as a related-party transaction?
A) an advance of one week's salary to an employee
B) sales of merchandise between affiliated companies
C) loans or credit sales to the principal owner of the client company
D) exchanges of equipment between two companies owned by the same person

Question

Quizplus · Accepted Answer

An advance of one week's salary to an employee would not likely be classified as a related-party transaction because the employee is not considered a related party of the company. Related parties usually include key management personnel, the board of directors, and close family members of those individuals.

B, C, and D could all be considered related-party transactions depending on the specific circumstances. Sales of merchandise between affiliated companies, loans or credit sales to the principal owner of the client company, and exchanges of equipment between two companies owned by the same person all involve entities that are related to the client company through some form of ownership or control.

Which of the Following Would Not Likely Be Classified as a Related-Party