Intercompany Debt That Must Be Eliminated from Consolidated Financial Statements

question 3

Multiple Choice

Intercompany debt that must be eliminated from consolidated financial statements may result from:

• A)​one member of a consolidated group selling its bonds directly to another member of the group.
• B)​one member of a consolidated group advancing funds to another member of the group so that the member may retire bonds it had issued to outside parties.
• C)​one member of a consolidated group purchasing bonds from outside parties as an investment that had been issued to outside parities by another member of the group.
• D)​all of the above.

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Definitions:

Allowance for Uncollectible Accounts

A contra-asset account that represents the amount of receivables a company does not expect to collect.

Accounts Receivable

Monies owed to a business by its customers for goods or services delivered or used but not yet paid for.

Bad Debt Expense

An expense recognized by businesses for receivables that are considered uncollectible, reflecting estimated losses.

Consignment

A business arrangement where goods are left with a third party to sell, but the original owner retains ownership until the items are sold.