Assume that during 2015 a wholly owned subsidiary sells land that originally cost $450,000 to its parent
Question:
Assume that during 2015 a wholly owned subsidiary sells land that originally cost $450,000 to its parent for a sale price of $500,000. The parent holds the land until it sells the land to an unaffiliated company on December 31, 2019. The parent uses the equity method of pre-consolidation bookkeeping.
a. Prepare the required [I] consolidation entry in 2015.
Description | Debit | Credit | |
---|---|---|---|
[lgain] | AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
b. Prepare the required [I] consolidation entry required at the end of each year 2016 through 2018.
Description | Debit | Credit | |
---|---|---|---|
[lgain] | AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
c. Assume that the parent re-sells the land outside of the consolidated group for $525,000 on December 31, 2019. Prepare the journal entry made by the parent to record the sale and the required [I] consolidation entry for 2019.
Description | Debit | Credit | |
---|---|---|---|
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
Land | Answer | Answer | |
[lgain] | AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
d. What will be the amount of gain reported in the consolidated income statement in 2019?
Finance for Executives Managing for Value Creation
ISBN: 978-0538751346
4th edition
Authors: Gabriel Hawawini, Claude Viallet