If you’re told that the parent bought goods from the subsidiary I know you subtract out that percentage of the COGS from both Rev and COGS (cpk has explained this to us many times). But if you are told that the goods were bought and then sold to a third party, does this always mean that no adjustment is necessary. In other words, when you buy the goods and it’s on your books, you have to make the adjustment, but once you sell it then you don’t?
If you sold it, then the goods have been taken off your BS and recorded as revenue, I don’t think any adjustment is necessary? When you say you subtract out that percentage of the COGS from both Rev and COGS, what do you mean exactly? I was under the assumption that if a parent bought goods from the sub, the entire transaction would be wiped out as if it never happened.
im assuming u have qbank. its q 89470. if u dont have qbank let me know and ill copy and paste it. anyway, a Q on a practice exam said that the goods have been sold and no adjustments were made so iw anted to check to seee that its always the case that if youre told everythings been sold, no adjustment is needed—adjustments only needed while the output is still in the parents possession.