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Related party sale. Recognized income even though no cash received and 1 point lacked commercial substance. What, if any, journal entry is necessary at December
Related party sale. Recognized income even though no cash received and 1 point lacked commercial substance. What, if any, journal entry is necessary at December 31? While reviewing the December 31 trial balance you noted a "Gain on sale of land" in the amount of $170,000. Upon further investigation you determined that the land that had been sold had been acquired 3 years ago at a cost of $30,000. The closing statement indicated a sale price of $200,000. No cash or notes receivable were received. The company did receive another parcel of land that management felt was worth $200,000. You further determined that the other party to the transaction was a company solely owned by the principal shareholder of your company and that the transaction lacked commercial substance. O No adjustment necessary O DR: Gain on sale of land 200,000; CR: Land 200,000 O DR: Gain on sale of land 30,000 CR: Land 30,000 DR: Gain on sale of land 170,000; CR: Land 170,000 DR: Land 170,000; CR: Gain on sale of Land 170,000
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