Pod Company, a 100% owned subsidiary of Pea Company, sold land to Pod on March 1,...

Pod Company, a 100% owned subsidiary of Pea Company, sold land to Pod on March 1, 2017, for $65,000. The land originally cost Pod $50,000. Pea still owns the land at the end of 2018.

On a consolidation worksheet, what adjustment would be made for 2017 regarding the land transfer?

On a consolidation worksheet, what adjustment would be made for 2018 regarding the land transfer?

Solutions

Expert Solution

Whenever there is intercompany transfer/ sale of non current non depreciable asset; elimination entry for the same is required in the year in which asset is first sold/ transferred and thenafter in every year until the asset is sold or useful life of the asset is expired
un the given case inter company transaction of sale of land has occured. Land of $ 50,000 sold at upstream of $ 65,000.
Hence land must have been reported in group accounts before adjustment at $ 65,000 whereas its original cost is only $ 50,000 hence gain of $ 15,000 (i.e. 65000-50000) required to be eliminated by the following journal entry in the year 2017......
Consolidation elimination entry Year- 2017

Gain on sale of land A/c Dr.... $ 15,000

To Land A/c ..............................$ 15,000

Any tax liability (if any ) recognized on gain on sale of land would also be required to eliminate
In the year 2018 and then after same entry would be made except instead of gain on sale of building "retained earning A/c would be debited" as above transaction is effected seperate financial statement in the year 2017
Consolidation elimination entry Year- 2018

Retained earning A/c Dr..... $ 15,000

To Land A/c ..............................$ 15,000

so far adjustment regarding NCI; these would not be affected in the case as there in no NCI (i.e. 100% owned)

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Ahmad company (the 80%-owned subsidiary); in 1/5/2018 sold land to Fatima Company (the subsidiary) at selling...

Ahmad company (the 80%-owned subsidiary); in 1/5/2018 sold land to Fatima Company (the subsidiary) at selling price $125,000, the cost of land $100,000. During 2020, Fatima Company sold the land at $140,000. Net income for Fatima Company as follows: 2018 2019 2020 Net Profit 80,000 100,000 60,000 Instructions: 1. Journalize the above transactions in Parent Company records and in the Subsidiary Company records. 2. Calculate the Parent company from the subsidiary’s net income? 3. Calculate the Minority interest from the...

On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for...

On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. What was...

Downstream Intercompany Land Transactions Saucony Company, a wholly-owned subsidiary of Puma Company, purchased a tract of...

Downstream Intercompany Land Transactions Saucony Company, a wholly-owned subsidiary of Puma Company, purchased a tract of land from Puma in 2019 for $5,000,000. Puma originally acquired the land for $2,000,000 and accounts for its investment in Saucony using the complete equity method. Required a. Assuming that Saucony still owns the land, give the working paper eliminations needed for the intercompany land sale when consolidated statements are prepared at the end of 2019 and 2020. Enter numerical answers using all zeros...

1. For the trait pod shape, pea plants are either inflated (Q), or constricted (q). Inflated...

1. For the trait pod shape, pea plants are either inflated (Q), or constricted (q). Inflated is the dominant form. In the P generation, A homozygous dominant pea plant is crossed with a plant possessing the constricted phenotype. What would the genotype of the F1 generation be? qq QQ All possible genotypes would be seen in the F1 generation Qq 2. In horses, a black mane (B) is dominant to a blond mane (b). A horse with a black mane...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 in cash. The equipment had originally cost $189,000 but had a book value of only $115,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $310,000 in net income in 2018 (not including any investment income) while Brannigan reported $101,300. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $330,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $330,000 in cash. The equipment had originally cost $297,000 but had a book value of only $181,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $430,000 in net income in 2018 (not including any investment income) while Brannigan reported $140,900. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $190,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $190,000 in cash. The equipment had originally cost $171,000 but had a book value of only $104,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $470,000 in net income in 2018 (not including any investment income) while Brannigan reported $154,100. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $250,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $250,000 in cash. The equipment had originally cost $225,000 but had a book value of only $137,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $350,000 in net income in 2018 (not including any investment income) while Brannigan reported $114,500. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

3. Top, a US Company, has a 100% owned subsidiary in Japan. The functional currency for...

3. Top, a US Company, has a 100% owned subsidiary in Japan. The functional currency for the subsidiary is the Japanese yen. The subsidiary purchases merchandise on credit from a German company, with payment due in US dollars. Between the date of sale and the due date of the payable, the yen strengthens against the US dollar. What will be the result to Top. a. there will be a foreign exchange gain there will be a foreign exchange loss there...

In January of 2019, a wholly owned subsidiary sold Equipment to the parent for a cash...

In January of 2019, a wholly owned subsidiary sold Equipment to the parent for a cash price of $122,500. The subsidiary had acquired the equipment at a cost of $140,000 and the estimated useful life when purchased was 10 years, and there was no salvage value. The subsidiary had depreciated the equipment for 4 years at the time of sale using the straight line method. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its...

Subjects