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.
Want to see more full solutions like this?
Chapter 5 Solutions
Fundamentals of Advanced Accounting
- Poonam's material quantity variance is favorable or unfavorablearrow_forward??arrow_forwardPoonam has a standard of 1.5 pounds of materials per unit, at S6 per pound. In producing 2,000 units, Poonam used 3,100 pounds of materials at a total cost of $18,135. Poonam's material quantity variance is favorable or unfavorable?arrow_forward
- General Accountingarrow_forwardSubject: General Accountingarrow_forwardThe following information describes a company's usage of direct labor in a recent period: Actual direct labor hours used 32,500 Actual rate per hour $18.00 Standard rate per hour $16.50 Standard hours for units produced 32,000 How much is the direct labor efficiency variance? Answer: $8,250 unfavorablearrow_forward
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning