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Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $597,500 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated

Respuesta :

The complete amount of  $597,500 will be eliminated because it is part of inter-company transactions.

What are inter-company transactions?

Intercompany transactions are those transactions that take vicinity in between the entities in the institution of corporations that proportion a holding-subsidiary relationship.

As a company cannot recognize the sales that it has made to itself, hence such intercompany eliminations are made.

The types of intercompany removal consist of intercompany debt, intercompany inventory possession, and intercompany sales and expenses.

Therefore, The complete amount of $597,500 will be eliminated because it is part of inter-company transactions.

Learn more about inter-company transactions:

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