Question
If a company sells a depreciable asset to its subsidiary at a profit on December 31, 20X3, what account balances must be eliminated or adjusted
If a company sells a depreciable asset to its subsidiary at a profit on December 31, 20X3, what account balances must be eliminated or adjusted in preparing the consolidated income statement for 20X3? If the sale instead occurred on January 1, 20X3, what additional account(s) will require adjustment in preparing the consolidated income statement?
When a parent company sells land to a subsidiary at more than book value, the consolidation entries at the end of the period include a debit to the gain on the sale of land. When a parent purchases the bonds of a subsidiary from a nonaffiliate at less than book value, the consolidation entries at the end of the period contain a credit to a gain on bond retirement. Why are these two situations not handled in the same manner on the consolidation worksheet?
How would the relationship between interest income recorded by a subsidiary and interest expense recorded by the parent be expected to change when comparing a direct placement of the parents bonds with the subsidiary to a constructive retirement in which the subsidiary purchases the bonds of the parent from a nonaffiliate?
Please provide as much detail on these topics. I would like to obtain a better understanding of these concepts.
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