Which of the Following Statements About Intercompany Transactions in a Corporate

question 97

Multiple Choice

Which of the following statements about intercompany transactions in a corporate group is true?

• A)They are not permitted when a parent-subsidiary relationship exists.
• B)They are eliminated when consolidated financial statements are prepared.
• C)They are recorded as revenue in the consolidated financial statements.
• D)They are added to the combined shareholders equity when consolidation occurs.

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Definitions:

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent or salaries.

Accounting Break-even

The point at which a company's total revenues exactly match its total expenses, indicating no net profit or loss from operations.

Financial Break-even

The point at which total revenues and total expenses are equal, resulting in no net profit or loss, indicating the minimum performance level required to avoid losing money.

NPV

NPV (Net Present Value) is a calculation used to determine the present value of an investment's cash inflows and outflows over time, taking into account a specific discount rate.