1. Assume Sub owns a parcel of land that cost $300,000. It bought the year in Year 1. It is now Year 20, and the land is worth $1,000,000. (27 points)
   1. What value should the land be on Sub’s books at? (3)
   2. Does GAAP allow Sub to record a holding gain on land? (2)
   3. Assume that Sub sells the land to Parent in Year 20 for $1,000,000. Should the consolidated group be allowed to recognize gain on this transaction? (2)
   4. Assume that Sub sells the land to Parent in Year 20 for $1 million. What entry will Sub make on its own books? (3)
   5. In the same facts as d, what entry will Parent make on its separate company books? (3)
   6. What consolidation entry is needed in Year 20 to avoid recording an improper gain and overstating the carrying value of the land? (3)
   7. Assuming the same facts, in Year 22 Parent still has the land on its books that it bought from the sub in Year 20 for $1,000,000. In year 20, what consolidation entry is needed to avoid overstating the value of the land? (3)
   8. Assume that in year 36, Parent sells the land for $3 million. What entry would Parent make on its own books to record this sale? (3)
   9. The land originally cost the Sub $300,000, and it was sold in Year 36 by Parent for $3,000,000, so the group gained $2,700,000 over this period. What consolidation entry is needed in Year 36 to ensure that the group reports a gain of $2,700,000 on this land sale? (3)

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