Use the following information to answer the next TWO items Company A (Parent) owns 90% of the common stock of Company B (Subsidiary). At the beginning of 2015, Company B sold land that had a book value of $35,000 to Company A for $50,000. What elimination entry is needed, related to the sale of land from Company B to Company A, in the consolidation worksheet for 20177 Debit Gain on Sale of Land $15,000, Credit Land $15,000 Debit Gain on Sale of Land $13,500, Credit Land $13,500 Debit Retained Earnings Company A $15,000, Credit Land $15,000 Debit Retained Earnings Company A $13,500, Credit Land $13,500 Debit Retained Earnings Company A $13,500, Debit Retained Earnings Company B $1,500, Credit Land $15,000 pange Correct Answer: E Which of the following is true about the gain on sale of land from Company B to Company A? a. The gain on sale of land can never be realized in the future because land is a non-depreciable asset. b. The gain on sale of land can be realized gradually in the future as the fair value of land increases above the price that Company A paid to Company B. The gain on sale of land can be realized in the future if Company A sells the land to outsiders. d. None of these statements is true. n Correct Answer: C Chapter 4 Review Question 10. 11, 12. Use the following information to answer the next FOUR items American Company acquired 80 percent of the voting common stock of California Company. At the beginning of 2016, American Company sold equipment that had a book value of $25,000 to California Company for $30,000. The equipment had a remaining useful life of 5 years and zero salvage value. Both companies use the straight line method of depreciation for their equipment. Which of the following entries is required in the consolidation worksheet for 2016 to eliminate the gains on sale of equipment? a. Debit Gain on sale of Equipment $5,000, Credit Equipment $5,000 . Debit Retained Earnings American Company $5,000, Credit Equipment $5,000 c. Debit Retained Earnings American Company $4,000, Debit Retained Earnings California Company $1,000, Credit Equipment $5,000 d. None of these. Correct Answer: A In the consolidation worksheet for 2016, what will be the adjustment to the \"Depreciation Expense Equipment\" account? a. Credit $6,000 b. Credit $5,000 c. Credit $1,000 d. None of these Correct Answer: C In the consolidation worksheet for 2018, what will be the adjustment to the \"Retained Earnings American Company\" account? Debit $5,000 Debit $3,000 Debit $2,000 Debit $2,400 Debit $1,600 Panow Correct Answer: B 13. 14. Chapter 4 Review Question Which of the following is true about the gains on the sale of equipment from American Company to California Company? It will be realized gradually over time as the equipment is used by California Company. It can be realized in the future if California Company sells the equipment to outsiders. BothAand B None of these. pongw Correct Answer: C When beginning and ending inventories include merchandise purchased from an affiliated company, how is the gross profit on that merchandise treated in the seller's income distribution schedule? Beginning Inventory Ending Inventory a. Added to income Added to income b. Added toincome Deducted from income c. Deducted from income Added to income d. Deducted fromincome Deducted from income Correct Answer: B