Question
Pumpkin Corporation purchased land on January 1, 20X6, for $50,000. On July 15, 20X8, it sold the land to its subsidiary, Spice Corporation, for $70,000.
Pumpkin Corporation purchased land on January 1, 20X6, for $50,000. On July 15, 20X8, it sold the land to its subsidiary, Spice Corporation, for $70,000. Pumpkin owns 80 percent of Spice's voting shares.
A.) MULTIPLE CHOICE: Based on the preceding information, what will be the worksheet consolidating entry to remove the effects of the intercompany sale of land in preparing the consolidated financial statements for 20X8?
| A. | Gain on Sale of Land | 20,000 | |
| Land | 20,000 | ||
| B. | Gain on Sale of Land | 16,000 | |
| Land | 16,000 | ||
| C. | Land | 16,000 | |
| Gain on Sale of Land | 16,000 | ||
| D. | Land | 20,000 | |
| Gain on Sale of Land | 20,000 |
B.) MULTIPLE CHOICE: Based on the preceding information, what will be the worksheet consolidating entry to remove the effects of the intercompany sale of land in preparing the consolidated financial statements for 20X9?
| A. | Investment in Spice | 20,000 | |
| Land | 20,000 | ||
| B. | Land | 16,000 | |
| Investment in Spice | 16,000 | ||
| C. | Investment in Spice | 16,000 | |
| Land | 16,000 | ||
| D. | Land | 20,000 | |
| Investment in Spice | 20,000 |
C.) MULTIPLE CHOICE: Which worksheet consolidating entry will be made on December 31, 20X9, if Spice Corporation had initially purchased the land for $50,000 and then sold it to Pumpkin on July 15, 20X8, for $70,000?
| A. | Investment in Spice | 12,000 | |
| NCI in NA of Spice | 8,000 | ||
| Land | 20,000 | ||
| B. | Investment in Spice | 16,000 | |
| NCI in NA of Spice | 4,000 | ||
| Land | 20,000 | ||
| C. | Land | 20,000 | |
| Investment in Spice | 14,000 | ||
| NCI in NA of Spice | 6,000 | ||
| D. | Land | 20,000 | |
| Investment in Spice | 18,000 | ||
| NCI in NA of Spice | 2,000 |
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