When intercompany transfers of noncurrent assets occurs between parent and subsidiary, the parent company must make necessary adjustments for the purpose of consolidated financial statements as long as the acquiring company holds the assets. When the assets are transferred at book value, no specific adjustments are needed, because the seller does not record gain or loss and both income and assets are stated correctly from consolidation viewpoint.When assets are transferred at more or less than book value, it requires special treatment. The parent must defer any unrealized gain or loss until the asset is sold to unrelated party. Any gain or loss realized by selling entity must be eliminated because consolidated entity still holds the asset. The dollar amount of each of the balances identified by a letter.

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Chapter 7, Problem 7.36P

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Introduction: When intercompany transfers of noncurrent assets occurs between parent and subsidiary, the parent company must make necessary adjustments for the purpose of consolidated financial statements as long as the acquiring company holds the assets. When the assets are transferred at book value, no specific adjustments are needed, because the seller does not record gain or loss and both income and assets are stated correctly from consolidation viewpoint.When assets are transferred at more or less than book value, it requires special treatment. The parent must defer any unrealized gain or loss until the asset is sold to unrelated party. Any gain or loss realized by selling entity must be eliminated because consolidated entity still holds the asset.

The dollar amount of each of the balances identified by a letter.

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