Sheridan Corp. owns 75% of Concord Inc. Both companies are in the mining industry. During 2020, Sheridan Corp. purchased a building from Concord Inc. for $1,990. The building’s original cost is $25,000 and its carrying amount in Concord Inc.’s financial statements is $1,600. Sheridan’s Contributed Surplus account contains a credit balance of $260 from previous related-party transactions. Concord’s Contributed Surplus account is nil. There is no available independent evidence of the value of the building because it is a unique building in a remote part of the country. Sheridan subsequently sold the building, during 2021, to an unrelated party for $2,150. Both Sheridan and Concord follow ASPE.

How would both Sheridan and Concord record the purchase and sale of the building during 2020? (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Record the subsequent sale of the building by Sheridan during 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Assume that the transaction is in the normal course of operations for both Sheridan and Concord and that it has commercial substance. Record the journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Calculate the total impact on income of the purchase and sale of the building for 2020 and 2021 for the consolidated reporting unit of the two companies. What can you conclude from your calculation?

 

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udy Is the transaction in the normal course of operations? No Is the change in the ownership interests in the item transferred substantive? No (a) tree answer the following. Related-party transaction occurs Yes-> Is the amount of the exchange supported by independent evidence? No (a) Yes Yas Yes is the transaction a nonmonetary exchange or transfer of a nonmonetary asset? is the transaction an exchange of products or property held for sale in the normal course of operations to facilitate sales? No Does the transaction have commercial substance? NO Yas Measure at carrying amount (bi Measure at exchange amount Carrying amount is used for both monetary and nonmonetary transactions in these circumstances the in are decumstances when the carrying amount of the tem received is not available, a reasonače stimate of the carrying amount based on the transferor's original cost may be used to measure the exchange No udy Is the transaction in the normal course of operations? No Is the change in the ownership interests in the item transferred substantive? No (a) tree answer the following. Related-party transaction occurs Yes-> Is the amount of the exchange supported by independent evidence? No (a) Yes Yas Yes is the transaction a nonmonetary exchange or transfer of a nonmonetary asset? is the transaction an exchange of products or property held for sale in the normal course of operations to facilitate sales? No Does the transaction have commercial substance? NO Yas Measure at carrying amount (bi Measure at exchange amount Carrying amount is used for both monetary and nonmonetary transactions in these circumstances the in are decumstances when the carrying amount of the tem received is not available, a reasonače stimate of the carrying amount based on the transferor's original cost may be used to measure the exchange No

Answer rating: 100% (QA)

Solution a Sheridan Corp Debit Cash 1990 Credit Contributed Surplus 260 CreditInvestment in Subsidi... View the full answer