Assume Company S1 sells land for $750,000 cash (with a carrying value of $ 150,000) to...

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Assume Company S1 sells land for $750,000 cash (with a carrying value of $ 150,000) to Company S2- neither are in real estate business and both are 100% owned by P Company (i.e. they are "sister" companies subject to common control) • This transaction is not in normal operations and does not have a substantive change in ownership interests of the asset transferred • S1 would be responsible for paying tax on the gain since it is a legal transfer-ASPE is not allowing the recognition of the gain based on substance • The taxes payable would be calculated based on the actual exchange amount • The net amount would go to contributed surplus • There would also be a future tax calculation required since the tax amounts will now be different than the GAAP amounts What is the initial entry for S1 assuming a tax rate of 40%? • What is the initial entry made by S2 assuming a tax rate of 33%? • What are the initial entries under IFRS for all parties? • What if P's ownership was 100% of S1 and 70% for S2-does this change the answer? • What if P's ownership was 60% of S1 and 45% of S2does this change the answer? Assume Company S1 sells land for $750,000 cash (with a carrying value of $ 150,000) to Company S2- neither are in real estate business and both are 100% owned by P Company (i.e. they are "sister" companies subject to common control) • This transaction is not in normal operations and does not have a substantive change in ownership interests of the asset transferred • S1 would be responsible for paying tax on the gain since it is a legal transfer-ASPE is not allowing the recognition of the gain based on substance • The taxes payable would be calculated based on the actual exchange amount • The net amount would go to contributed surplus • There would also be a future tax calculation required since the tax amounts will now be different than the GAAP amounts What is the initial entry for S1 assuming a tax rate of 40%? • What is the initial entry made by S2 assuming a tax rate of 33%? • What are the initial entries under IFRS for all parties? • What if P's ownership was 100% of S1 and 70% for S2-does this change the answer? • What if P's ownership was 60% of S1 and 45% of S2does this change the answer?