MB-920 Intercompany order processing Practice Question
A company uses Dynamics 365 Supply Chain Management to manage multi-site operations. They need to transfer inventory between two warehouses in different legal entities. What is the correct approach?
⚠ Common exam trap
Candidates often mistake transfer orders as the default for any inventory transfer, but transfer orders are limited to the same legal entity. Intercompany order processing is required when separate legal entities are involved.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Use intercompany order processing to create a purchase order and sales order.
Intercompany order processing is the correct approach for transferring inventory between warehouses in different legal entities. It creates a purchase order in the receiving company and a sales order in the sending company, properly recording the transaction across legal entities. Option A is incorrect because inventory adjustment journals do not track intercompany transfers and are meant for internal adjustments. Option B is incorrect because transfer orders are only valid within a single legal entity. Option C is incorrect because a purchase order alone does not create the corresponding sales order needed for intercompany accounting.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Use an inventory adjustment journal to reduce stock in one warehouse and increase in the other.
Why it's wrong here
Incorrect. Inventory adjustment journals are for internal corrections, not intercompany transfers.
- ✗
Create a transfer order between the two warehouses.
Why it's wrong here
Incorrect. Transfer orders work only within a single legal entity, not across legal entities.
- ✗
Create a purchase order from the receiving warehouse to the sending warehouse.
Why it's wrong here
Incorrect. Creating a purchase order alone does not set up the necessary intercompany relationship and does not create a sales order in the sending entity.
- ✓
Use intercompany order processing to create a purchase order and sales order.
Why this is correct
Correct. Intercompany order processing creates both a purchase order and a sales order to properly handle the transfer between legal entities.
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