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QUESTION #3(15 MARKS)

The X Companys 2015 financial statements disclosed the following transaction with Y Company that was formed by X-

In June 2015, Y purchased machinery from X for $100 million. Y paid X $30 million in cash and the balance in an interest-bearing note for $70 million. X recognized $67million pre-tax earnings related to this asset sale

Required:

Determine how this transaction should have been accounted for assuming:-

1. X controlled Y and used consolidated financial statements to report the investment in Y (5 marks)
2. X had significant influence and used the equity method to report the investment in Y (5 marks).
3. X did not have control or significant influence over Y (5 marks)