Arms length and non arms length transactions

• The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
• Assignments submitted through email will not be accepted.
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• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
1. The following intercompany transactions occurred during the year:
• Parent loaned $12500 to Sub. To keep things simple, assume that there is no interest revenue or interest expense associated with this loan.
• Parent made a sale to Sub for $13000 cash. The inventory had originally cost Parent $12220. Sub then sold that same inventory to an outsider for $14000.
• Parent made a sale to Sub for $15000 cash. The inventory had originally cost Parent $11280. Sub has not yet sold that same inventory to an outsider. (Don’t forget equity method entry!)
Based on our “conceptual discussion,” what consolidation worksheet entries would you make? (2 Marks)

2. Give two examples of Arm’s Length Transactions and Three Examples of Non Arm’s Length Transactions. (1 Mark)

3. Find the indirect exchange rates on the two dates and show the impact of changes in exchange rates on Imports and Exports. (2 Marks)
January, 2010 January 2011
Direct Exchange Rate (SAR/$) SAR 3.75 SAR 3.50