Choose the BEST answer for the following questions.

1. What of the following is an example of an unrealized gain or loss on intercompany sale of equipment?

a. A gain recorded only by P which should also be recorded by S

b. A difference between Ps cost and the price for which it sells the equipment to S

c. Ss gain or loss on the sale of equipment bought from P and now sold to an outsider

d. Any gain or loss on the sale of equipment recorded by either P or S

2. How does unrealized gain or loss on the intercompany sale of equipment affect the consolidated statements workpaper?

a. The gain or loss is permanently removed from the consolidated statements.

b. The gain or loss is recognized in the next year, just like we recognized unrealized profit in beginning inventory.

c. The gain or loss is allocated over the useful life of the equipment.

d. The gain or loss is amortized over some time period not to exceed 20 years.

3. What is the workpaper entry to eliminate the unrealized gain, assuming an upstream sale of land, in years subsequent to the sale when P uses the complete equity method?

a. Debit land; credit gain on sale of land

b. Debit beginning retained earnings P and retained earnings S; credit land

c. Debit investment in S; credit land

d. Debit investment in S and retained earnings S; credit land

4. What is realization through usage?

a. By decreasing depreciation expense, we increase income and thus realize the unrealized gain

b. By increasing depreciation expense, we decrease the cost of the asset to its original cost

c. By decreasing depreciation expense, we increase cost of goods sold

d. By increasing the asset, we realize the gain because the asset is worth more than it was originally

5. Why is accumulated depreciation credited in the elimination entry?

a. To eliminate the accumulated depreciation previously recorded by the selling company

b. To eliminate the accumulated depreciation previously recorded by the buying affiliate

c. To eliminate the accumulated depreciation recorded during the current year by the selling affiliate

d. It is part of the entry to restate the asset to its original state to the consolidated entity

6. How is the entry to recognize unrealized gain different between the cost and the complete equity method?

a. The cost method debits beginning retained earnings P and the equity method debits investment in S

b. The cost method credits beginning retained earnings P and the equity method credits investment in S

c. The equity method does not have to do an elimination entry because it is recorded on Ps books

d. The cost method does not have to do an elimination entry because it is recorded on Ss books

7. If S sells equipment to P, what entries are included in Ps books if it uses the equity method?

a. P decreases its equity in S income for its share of unrealized gain on the sale.

b. P increases its equity in S income for the depreciation adjustment.

c. P decreases its equity in S income for its share of unrealized gain on the sale, and increases its equity in S income for the depreciation adjustment.

d. P neither decreases its equity in S income for its share of unrealized gain on the sale, nor increases its equity in S income for the depreciation adjustment.

8. What is the general format of the elimination entries to reflect intercompany interest or rent?

a. Debit expense, credit income

b. Debit payable, credit receivable

c. Debit income, credit expense

d. Debit receivable, credit payable

9. What is often the result of intercompany service fees?

a. One affiliate records the transaction as revenue and the other records it as a contra revenue

b. One affiliate records the transaction as revenue and the other records it as an expense or asset

c. Both affiliates record income and receivables

d. The selling affiliate does not receive any income

10. When land involved in an intercompany sale is sold to outsiders, the gain on the sale of that land is

a. decreased by the total unrealized gain from the original sale

b. decreased by the remaining unrealized gain from the original sale

c. increased by the remaining unrealized gain from the original sale

d. increased by the total unrealized gain from the original sale

[] On January 2, 2013, Plymouth Company sold a piece of equipment to its 80% subsidiary Shakopee Corporation. The equipment originally cost Plymouth $50,000 and had accumulated depreciation of $20,000. Plymouth sold it to Shakopee for $35,000. It has a remaining useful life of 5 years. Plymouth uses the cost method to record its investment in Shakopee.

A. Calculate the unrealized gain from the intercompany sale of equipment

B. Prepare the elimination entries related to this intercompany sale for the five years the asset is expected to be useful

2013
To eliminate intercompany sale of equipment and restate equipment and accumulated depreciation to original balances
Gain on Sale of Equipment
Equipment
Accumulated Depreciation
To adjust depreciation expense to realize unrealized gain
Accumulated Depreciation
Depreciation Expense
2014 2017
To eliminate unrealized gain from prior years intercompany sale of equipment and to restate equipment and accumulated depreciation
Equipment
Beginning RE - P
Accumulated Depreciation
To adjust depreciation expense and accumulated depreciation for unrealized gain
	2014		2015		2016			2017
Accumulated Depreciation
Depreciation Expense
Beginning RE - P

Plz answer all the question. Plzz.