Explain why intra-entity transactions occur so frequently.
Answer to Problem 1Q
The intra-entity transactions are less costly in nature when compared to transaction made with other entities.
Explanation of Solution
Occurrence of intra-entity transactions:
Intra-entity transactions occur so frequently between parent and subsidiary because of the reason of generating more profits in consolidated financial statements. The intra-entity transactions are less costly in nature when compared to transaction made with other entities.
The intra-entity transactions are the transactions about sale and purchase of assets between parent and subsidiary where the transaction is recorded as normal sale and the profit is recorded.
However, the intra-entity transactions are removed while preparing the consolidated financial statements.
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ADVANCED ACCOUNT LL/W CONNECT +PROCTORIO
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