A parent sells land costing $40,000 to a subsidiary in 2018 for $55,000. The subsidiary sells the land in 2020 to a third party for $65,000. On the consolidated income statement for 2020, the gain on sale of land is:

a. $15,000

b. $10,000

c. $0

d. $25,000

37. A parent sells land to its subsidiary for $40,000 and reports a gain of $5,000. At what amount should the land be shown on the consolidated balance sheet?

a. $ 5,000

b. $35,000

c. $40,000

d. $45,000

38. When completing a consolidation working paper, the eliminating entry for a prior year intercompany transfer of land includes a debit to the subsidiarys retained earnings when the transfer is:

a. A downstream sale and the transfer was made at a gain

b. An upstream sale and the transfer was made at a loss

c. An upstream sale and the transfer was made at a gain

d. A downstream sale and the transfer was made at a loss

39. A parent sold land costing $400,000 to its subsidiary for $450,000 in 2017. The subsidiary still holds the land at the end of 2019. On a working paper prepared to consolidate the financial statements of the parent and subsidiary in 2019, the eliminating entry connected with this land includes a $50,000 credit to:

a. Investment in subsidiary

b. Beginning retained earnings of the subsidiary

c. Gain on sale of land

d. Land

40. A subsidiary sold its parent some land at a profit of $10,000 in 2019. The parent still holds the land. On a working paper prepared to consolidate the accounts of the parent and its subsidiary in 2021, the eliminating entry connected with this land includes a $10,000 debit to:

a. Investment in subsidiary

b. Beginning retained earnings

c. Gain on sale of land

d. No effectelimination entry is not required