1. To account for related companies as a single economic entity requires eliminating all intra-entity sales/purchases balances. For example, if Arlington Company makes an $80,000 inventory sale to Zirkin Company, an affiliated party within a business combination, both parties record the transfer in their internal records as a normal sale/purchase. The following consolidation worksheet entry is then necessary to remove the resulting balances from the externally reported figures. Cost of Goods Sold is reduced here under the assumption that the Purchases account usually is closed out prior to the consolidation process.
   
   In the preparation of consolidated financial statements, the preceding elimination must be made for all intra-entity inventory transfers.
   
   What is the entry?

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In preparation of Consolidated financial Statemen... View the full answer