7) P Company owns 80% of the outstanding common stock of S Company. On January 1....

7) P Company owns 80% of the outstanding common stock of S Company. On January 1. 2018, S Company sold land to P Company for OMR 500,000. S Company originally purchased the land for OMR 300,000. On January 1, 2019, P Company Sold the land purchased from S Company to a company outside the affiliated group for OMR 600,000. A. Prepare the journal entry of intercompany sales. B. Prepare in general journal form the workpaper entries necessary because of the inter company sale of land in the consolidated financial statements workpaper for the year ended December 31, 2019.

8) Difference between Internal reconstruction and External reconstruction (Merger and acquisition)?

Expert Solution

Answer 7:

A) Journal Entry of intercompany sales:(January 01, 2018 & 19)

Title	Debt(in $)	Credit(in $)
S A/c	500,000
Land A/c		300,000
Profit on sale of land A/c		200,000
Land A/c	500,000
P A/c		500,000
Jan-01-2019
Cash A/c	600,000
Land A/c		500,000
Profit on sale of land		100,000

B) The consolidatedFinancial statements workpaper - year end December 31, 2019

Profit on sale of land	200,000
Land A/c		20000

Answer 8:

The Differences between Internal reconstruction and External reconstruction are explained below:

Internal reconstruction is one of the collective reorganization purposes where internal adjustments are addressed to
defeat economic problem.

External reconstruction introduces to cashing a firm and over beginning a fresh firm which implies creating a new firm for obtaining covering the current firm.

Few Differences between Internal & External reconstruction

Internal reconstruction	External reconstruction
No new firm is Created	The new firm is created
No firm is cashed/liquidated	Current firm requires to be cashed/liquidated
Court approval is needed	It can be executed without court approval

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