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    A consolidation working paper entry is required each year that Sidd holds the land it purchased from Parla Corporation in 2014 for $38,000, which had a book value of $24,000. In 2014, Parla and Sidd's financial statements would require a working paper entry to eliminate the $14,000 unrealized gain from the intercompany sale by crediting land for $14,000. Consolidation entries are also required to properly account for depreciation and the elimination of intercompany profits on equipment and vehicles sold between consolidated entities.

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    A consolidation working paper entry is required each year that Sidd holds the land it purchased from Parla Corporation in 2014 for $38,000, which had a book value of $24,000. In 2014, Parla and Sidd's financial statements would require a working paper entry to eliminate the $14,000 unrealized gain from the intercompany sale by crediting land for $14,000. Consolidation entries are also required to properly account for depreciation and the elimination of intercompany profits on equipment and vehicles sold between consolidated entities.

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    A consolidation working paper entry is required each year that Sidd holds the land it purchased from Parla Corporation in 2014 for $38,000, which had a book value of $24,000. In 2014, Parla and Sidd's financial statements would require a working paper entry to eliminate the $14,000 unrealized gain from the intercompany sale by crediting land for $14,000. Consolidation entries are also required to properly account for depreciation and the elimination of intercompany profits on equipment and vehicles sold between consolidated entities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    113 views3 pages

    Terms in This Set

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    Accounting Materials
    A consolidation working paper entry is required each year that Sidd holds the land it purchased from Parla Corporation in 2014 for $38,000, which had a book value of $24,000. In 2014, Parla and Sidd's financial statements would require a working paper entry to eliminate the $14,000 unrealized gain from the intercompany sale by crediting land for $14,000. Consolidation entries are also required to properly account for depreciation and the elimination of intercompany profits on equipment and vehicles sold between consolidated entities.

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    In 2014, Parla Corporation sold land to its subsidiary, Sidd Corporation, for $38,000. It had a
    book value of $24,000. In the next year, Sidd sold the land for $41,000 to an unaffiliated firm.

    1) Which of the following is correct?


    A) No consolidation working paper entry is required for this transaction in 2014.
    B) A consolidation working paper entry is required only if the subsidiary was less than 100%
    owned in 2014.
    C) A consolidation working paper entry is required each year that Sidd has the land.
    D) A consolidated working paper entry was required only if the land was held for resale in 2014.
    C
    Objective: LO1
    Easy

    2) The 2014 unrealized gain from the intercompany sale


    A) should be recognized in consolidation in 2014 by a working paper entry.
    B) should be eliminated from consolidated net income by a working paper entry that credits land
    for $14,000.
    C) should be eliminated from consolidated net income by a working paper entry that debits land
    for $14,000.
    D) should be eliminated from consolidated net income by a working paper entry that credits gain
    on sale of land for $14,000.
    B
    Objective: LO1
    Easy
    3) On January 1, 2014, Bigg Corporation sold equipment with a book value of $20,000 and a 10-
    year remaining useful life to its wholly-owned subsidiary, Little Corporation, for $30,000. Both
    Bigg and Little use the straight-line depreciation method, assuming no salvage value. On
    December 31, 2014, the separate company financial statements held the following balances
    associated with the equipment:

    Bigg Little
    Gain on sale of equipment $10,000
    Depreciation expense $3,000
    Equipment 30,000
    Accumulated depreciation 3,000

    A working paper entry to consolidate the financial statements of Bigg and Little on December
    31, 2014 included a
    A) debit to equipment for $10,000.
    B) credit to gain on sale of equipment for $10,000.
    C) debit to accumulated depreciation for $1,000.
    D) credit to depreciation expense for $3,000.
    C
    Objective: LO2
    Moderate

    Use the following information to answer the question(s) below.

    On December 31, 2014, Pinne Corporation sold equipment with a three-year remaining useful
    life and a book value of $21,000 to its 70%-owned subsidiary, Sull Company, for a price of
    $27,000. Pinne bought the equipment four years ago for $49,000. The salvage value is zero.
    Straight-line depreciation is used by both companies.

    4) An elimination entry at December 31, 2014 for the intercompany sale will include a
    A) credit of $6,000 to Depreciation Expense.
    B) credit of $6,000 to Accumulated Depreciation.
    C) credit of $6,000 to Equipment.
    D) credit of $6,000 to Gain on Sale of Equipment.
    C
    Objective: LO2
    Moderate
    5) After eliminating/adjusting entries are prepared, what was the intercompany sale impact on
    the consolidated financial statements for the year ended December 31, 2014?
    A) Consolidated Net Income Consolidated Net Assets
    No effect No effect
    B) Consolidated Net Income Consolidated Net Asset
    No effect Increased
    C) Consolidated Net Income Consolidated Net Asset
    Decreased Decreased
    D) Consolidated Net Income Consolidated Net Asset
    Decreased No effect
    A
    Objective: LO2
    Moderate
    6) On January 2, 2014, Paogo Company sold a truck with book value of $15,000 to Sanall
    Corporation, its wholly-owned subsidiary, for $20,000. The truck had a remaining useful life of
    five years with zero salvage value. Both firms use the straight-line depreciation method. If Paogo
    failed to make year-end adjustments/eliminations on the consolidated working papers in 2014,
    consolidated depreciation expense for 2014 would be
    A) $5,000 too high.
    B) $5,000 too low.
    C) $1,000 too low.
    D) $1,000 too high.
    D
    Objective: LO2

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