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1. Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income:

I. in the year of sale

II. Over the period of time the subsidiary uses the land

III. In the year the subsidiary sells the land to unaffiliated entity

Choices

a. II

b. III

c. I or II

d. I

2. On January 5, 2022, Shiela Corp. sold land for P1,500,000 to its 80% own subsidiary, Jenny company. The land had a book value of P1,000,000. On August 20, 2023, Jennie company sold the land for P1,800,000 to outside party. Which of the following statements is correct?

a. Consolidated working paper journal entry is required only if the land was held for resale to in 2023

b. No consolidation working paper journal entry is required in 2022

c. A consolidation working paper journal entry is necessary each year until the land is sold to outside party

d. A consolidation working paper journal entry is required only of the subsidiary was a wholly owned subsidiary

3. Any intercompany gain or loss on an upstream sale of land should be recognized in consolidated net income:

I. in the year of sale

II. Over the period of time the subsidiary uses the land

III. In the year the subsidiary sells the land to unaffiliated entity

Choices

a. II

b. III

c. I or II

d. I

4. A partially owned subsidiary sold a machine to its parent at a gain. In the year subsequent to the year of intercompany sale of equipment, the working paper consolidation entry under cost method will debit:

I. Equipment

II. Accumulated Depreciation

III. Investment in Subsidiary

IV. Retained Earnings

V. NCI

Choices

a. IV and V

b. I, IV, and V

c. I, II and V

d. III and IV

5. The parent entity uses equity method to account its investment in its 80% subsidiary. The parent entity recorded in its separate notes this journal entry: Debit to Investment in subsidiary and Credit to investment income.

What is the possible transaction of the parent entity for this journal entry?

a. To record the amortization and depreciation of excess of cost over the book value of net identifiable assets

b. To record the 80% of the subsidiary's net income

c. To record the 80% dividend from subsidiary

d. All of the above

6. On January 1, 2025, Lisa Corp. acquired 80% interest of Rose Company. On January 2, 2025, Rose made an intercompany sale of machine at a gain. The non-controlling interest share of income on gain on sale for 2026 will include:

a. The realized gain in the second year from the downstream sale

b. The realized gain in the second year from the upstream sale

c. Unrealized gain in the second year from the upstream sale

d. Both realized gain and unrealized gain in the second year from upstream sale

7. A partially owned subsidiary sold non-depreciable assets to its parent at a loss. In the year subsequent to the year of intercompany sale of non-depreciable assets, the working paper consolidation entry under cost method will debit:

I. Non-depreciable assets

II. Investment in Subsidiary

III. NCI

IV. Retained Earnings

Choices

a. I

b. I, III, and V

c. I, II and IV

d. III and IV

8. The intercompany gain on sale of depreciable assets downstream is realized when:

a. The parent sold the depreciable assets to subsidiary

b. The subsidiary resells the depreciable assets to parent

c. The subsidiary resells the depreciable assets to outside party

d. The subsidiary abandon the depreciable assets