P Company owns 90% of the outstanding common stock of S Company. On January 1, 2020, S

Question:

P Company owns 90% of the outstanding common stock of S Company. On January 1, 2020, S Company sold land to P Company for $600,000. S Company originally purchased the land for $400,000.

On January 1, 2021, P Company sold the land purchased from S Company to a company outside the affiliated group for $700,000.

Required:

A. Calculate the amount of gain on the sale of the land that is recognized on the books of P Company in 2021.

B. Calculate the amount of gain on the sale of the land that should be recognized in the consolidated financial statements in 2021.

C. Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in the consolidated financial statements workpaper for the year ended December 31, 2021.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...

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