9. A parent company sells land to its wholly-owned subsidiary in a prior year, reporting a gain of $20,000. In the current year, the subsidiary sells the land to an outside developer and reports a gain of $50,000. In the consolidation working paper at the end of the current year, the elimination of this transaction will result in: Select one: a. A $70,000 decrease in land b. A $20,000 decrease in beginning retained earnings c. A $20,000 increase in gain on sale of land d. A $50,000 increase in investment in subsidiary

9. A parent company sells land to its wholly-owned subsidiary in a prior year, reporting a gain of $20,000. In the current year, the subsidiary sells the land to an outside developer and reports a gain of $50,000. In the consolidation working paper at the end of the current year, the elimination of this transaction will result in: Select one: a. A $70,000 decrease in land b. A $20,000 decrease in beginning retained earnings c. A $20,000 increase in gain on sale of land d. A $50,000 increase in investment in subsidiary

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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am. 105.
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31 and are shown in the table given below. The following items were overlooked when the statements were prepared: • The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $13,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. • Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Year 5 $ 755,000 8,800 3,300 Miscellaneous revenues Gain on sale of assets Rental revenue Miscellaneous expenses Rental expense Depreciation expense Income tax expense Non-controlling interest Net income NCI Required: Prepare correct consolidated income statements for Years 5 and 6.…
15.
In a prior year, a wholly-owned subsidiary sold land costing $100,000 to its parent for $125,000. In the current year, the parent sold the land to an outside company for $170,000. On a working paper prepared to consolidate the accounts of the parent and its subsidiary at the end of the current year, the eliminating entry connected with this land sale includes Select one: a. a $25,000 debit to the investment in subsidiary account b. a $45,000 debit to beginning retained earnings c. a $25,000 credit to gain on sale of land Od. no entry; the land is no longer in the consolidated entity O O