Intercompany Profits and Transfers of Inventory
Many companies transfer inventories from one affiliate to another. Often the companies have integrated operations in which one affiliate provides the raw materials, another manufactures finished products, another distributes the products, and perhaps another sells the products at retail. In other cases, various affiliates may be established for selling the company’s products in different geographic locations, especially in different countries. Often tax considerations also have an effect on intercompany transfers.
Required
a. Are Xerox Corporation’s intercompany transfers significant? How does Xerox treat intercompany transfers for consolidation purposes?
b. How does ExxonMobil Corporation price its products for intercompany transfers? Are these transfers significant? How does ExxonMobil treat intercompany profits for consolidation purposes?
c. What types of intercompany and intersegment sales does Ford Motor Company have? Are they significant? How are they treated for consolidation?
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