Elimination of Intercomp Inventory (Assets)Profit due to markup sales price

[Former Member]

Hi all

I have a question regarding elimination of inventory profit when a company sells inventory at a profit to another company within the same parent.

The scenario is company A produces 100 quantities of Product X for $100 ($1 per Product X - Cost of Sales) and sells it to Company B for $200 with mark up price ($2 per Product X u2013 Sales). Now Company A has sales of $200 while Company B has COS of $200 which will be easily eliminated by intercompany elimination. But now Company B has $200 worth of Inventory when it should be actually only $100 thus inflating the assets. Is there a business rule to eliminate inventory/asset of this kind?

Also now if Company B sells 80 quantities of Product X, 50 of which are from the ones supplied by Company A, how do we evaluate inventory and eliminate the Inventory profit because of stock transfer. How do we track all these stock movements?

Please let me know.

Thanks,

Ameya Kulkarni

[Former Member]

Answer in another thread