[vodrldnr]

1. during years 1 jones company engaged in the following transaction.

salary expense to key employees who are also principle owners $100,000
sales to affiliated enterprise $250,000

which of two transaction would be disclosed as related party transaction in jones year 1 Financial statement ?

answer : 250,000 (only sales to affiliated enterprise is disclosed)

2. F/S shall include disclosure of material transaction between related parties except

a. non monetary exchanges by affiliates
b. sales of inventory by a subsidiary to its parents
c.expense allowance fore executives which exceed normal business practice
d. company’s agreement to act as surety for a loan to its chief executive officer

anser b (sales of inventory by a subsidiary to its parents )

what is going on here ???

problem 1 says sales to affiliated enterprise is disclosed and problem 2 says sales of inventory by a subsidiary to its parents is not disclosed ?

THIS THING MAKES ME CRAZY !!!! WHAT IS GOING ON ???

It ain't About How Hard You Hit

[Anonymous]

I'm guessing there's an exception for inventory and/or for subsidiary to parent sales. More like subsidiary to parent. So, in Problem #1, it doesn't give enough details to know it's exempt from disclosure; Problem #2 does.

However, it's been long enough since I tested that I don't remember these details. 🙂 So just guessing based on “it'd be logical if…” and it sounding vaguely familiar, but not saying for certain. Maybe see if you can find any such exemption in the study materials?

[vodrldnr]

@Lilla, my text book says sales of inventory by a subsidiary to its parents is not required for disclosure if it is deleted in the preparation of Consolidated F/S…

in this sense, problem 1 makes sense since the question is ” in jones year 1 Financial statement ”

but for problem 2, it did not specifically mention if it is Single entity's F/S or consolidated F/S …

It ain't About How Hard You Hit

[Anonymous]

Subsidiary and Affiliate are 2 different things. Subsidiary is Majority of control and affiliate is minority ownership. Names are deceiving, but it is what it is.

[vodrldnr]

@Loo, wow.. .then everything totally makes sense … so deceiving …. lol

It ain't About How Hard You Hit

[Author]

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