. Gains on merchandise sales b. Gains on the sale of land c. Gains on the sale of depreciable fixed assets d. Interest on intercompany notes
For each of the following intercompany transactions, state the principle to be used in accounting for intercompany gains on current and future consolidated income statements:
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a. |
Gains on merchandise sales |
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b. |
Gains on the sale of land |
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c. |
Gains on the sale of |
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d. |
Interest on intercompany notes |
Schedule 41 for Distribution of Income.
a. The gain is deferred throughout the intercompany sale period and recognised when the products are sold to third parties. Both earnings are recognised when the sale to third parties takes place within the same period as the intercompany sale.
b. The gain is not recorded during the intercompany sale period. When the land is resold to outside parties, it is deferred and acknowledged at a later time. This will frequently result in a permanent deferral.
c. The gain isn't acknowledged on the day of the sale. It is postponed and recorded over the asset's depreciable life on the buyer's accounts.
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