Question

Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $470,000 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.

Answer 1

Answer:

the complete amount of the debt: 470,000

Explanation:

Jordan owns 75% of Paxson

Paxson owes 470,000 to parent company from inventory purchases.

As this debt is from intra-entity transaccions.

This amount balance-off as are debt to the subsidiary and recevable for the parent. It will be competely eliminated in the consolidated financial statement.