Question
R Company, an 80% owned subsidiary of T Company, purchased land from T company on March 1, 2017, for $75,000. The land originally cost T
R Company, an 80% owned subsidiary of T Company, purchased land from T company on March 1, 2017, for $75,000. The land originally cost T company $60,000. R company reported net income of $125,000 and $140,000 for 2017 and 2018, respectively. T company uses the equity method to account for its investment.
a) Compute the gain or loss on the intra-entity transfer of land that should be reported on the books of R company prior to consolidation.
b) On a consolidation worksheet, what journal entry would be made for 2017 regarding the land transfer
c) On a consolidation worksheet, having used the equity method, what journal entry would be made for 2018 regarding the land transfer?
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