Concept explainers
a.
Sale of subsidiary sales by parent:When parent sales share of subsidiary, parent has to recognize a gain or loss on the difference between selling price and the change in the carrying amount of its investment. From consolidation viewpoint, when subsidiary reacquires its share from parent, the transaction represents an internal transfer and does not give rise to a gain or loss.
Because the gain or loss will be eliminated in consolidation process. A better approach is for the parent to adjust additional paid-in capital rather than record gain or loss on the transaction.
The consolidation entry needed to complete consolidated
b.
Sale of subsidiary sales by parent:When parent sales share of subsidiary, parent has to recognize a gain or loss on the difference between selling price and the change in the carrying amount of its investment. From consolidation viewpoint, when subsidiary reacquires its share from parent, the transaction represents an internal transfer and does not give rise to a gain or loss.
Because the gain or loss will be eliminated in consolidation process. A better approach is for the parent to adjust additional paid-in capital rather than record gain or loss on the transaction.
The preparation of consolidated balance sheet worksheet
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Chapter 9 Solutions
Advanced Financial Accounting
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