Upstream Intercompany Land Transactions

Source Sandals is a subsidiary of Pony Industries. In 2016, Pony purchased land from Source for $8,000,000. Source has carried the land at $3,400,000 on its books, prior to the sale. Pony holds the land until 2020, when it sells it to an outside party for $3,000,000.

Required

a. Prepare the eliminating entry (1) for the intercompany land sale for each of the years 2016 and 2019.

b. Prepare the eliminating entry (1) for 2020, when the land is sold to an outside party. On the consolidated income statement, what amount appears as the gain or loss on the sale of the land?