Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $400,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?

a) 0

b) $100,000.

c) $300,000.

d) $400,000.

Question

Business

Elise Adams

12 April, 04:30

Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $400,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?

a) 0

b) $100,000.

c) $300,000.

d) $400,000.

+4

Answers (1)

Know the Answer?

Aliza Blackburn · Answer 1

Because this is an inter-entity balance then the amount that should be eliminated of this debt is the letter D. all the $400,000.

Explanation:

Inter entity balance facilitates the management of allocations and transfers between entities. They provide a better control over transactions spanning multiple entities, other benefit is that the accuracy of the financial data improves and finally and this is why the anser is option D. is that it keeps each entity in balance