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Preparing the [I] consolidation entries for sale of land Assume on June 15, 2013 a parent...

Preparing the [I] consolidation entries for sale of land

Assume on June 15, 2013 a parent company sells land that originally cost $100,000 to its wholly-owned subsidiary for a sale price of $130,000. The subsidiary holds the land until it sells the land to an unaffiliated company on November 12, 2020. The parent uses the equity method to account for its Equity Investment.

a. Prepare the required [I] consolidation entry in 2013.

b. Prepare the required [I] consolidation entry required at the end of each year 2014 through 2019.

c. Assume the subsidiary resells the land outside of the consolidated group for $170,000 on November 12, 2020. Prepare the journal entry made by the subsidiary to record the sale and the required [I] consolidation entry for 2020.

d. What will be the amount of gain reported in the consolidated income statement in 2020?

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Homework Answers

Answer #1
Description Debit Credit Remarks
a. Gain on sale 30000 ( 130,000 - 100,000)
Land 30000 ( 130,000 - 100,000)
b. Retained earnings 30000 ( 130,000 - 100,000)
Land 30000 ( 130,000 - 100,000)
c. Cash/ Accounts receivable 170000
Land 130000
Gain on sale 40000 ( 170,000 - 130,000)
Equity investment 40000 ( 170,000 - 130,000)
Gain on sale 40000 ( 170,000 - 130,000)
d. Consolidated gain of Group = 170,000 - 100,000 = 70,000

***Note:- The above accounts have been selected from the given chart of accounts. Different account names can be selected based on different assumptions. Please comment in case of any doubts or queries and i will get back to you.***

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