2. Which of the following statements is true?

a Under the equity method, Faizal Company’s Investment in Azmi account will be $2,000 less than its underlying equity in Azmi throughout 2017.

b No workpaper adjustments for the land are required in 2017 if Faizal Company has applied the equity method correctly.

c A workpaper entry debiting gain on sale of land and crediting land will be required each year until the land is sold outside the consolidated entity.

d In 2018, the year of Azmi’s sale to an outside entity, the workpaper adjustment for the land will include a debit to gain on sale of land for $2,000.

Use the following information to answer questions 3 and 4:

Pon Corporation sold an office building to its 90 percent-owned subsidiary, Son Corporation, for $120,000 on December 31, 2016. The cost of the building to Pon was $100,000, the book value at the time of sale was $80,000, and the building had a remaining useful life of four years.