Question

Popcorn Inc. and Pretzel Inc. are related companies subject to consolidation. During the year, Pretzel Inc. sold land to Popcorn Inc. for $600,000 cash that had a BV of $500,000 and a FMV of $700,000. The elimination entry at the time of consolidation for this transaction would be:

Question 2 options:

	a) Debit Gain on Sale of Land $200,000, Credit Land $200,000
	b) Debit Land $100,000; Credit Loss on Sale of Land $100,000
	c) Debit Land $80,000. Debit Gain on Purchase of Land $20,000; Credit Loss on Sale of Land $100,000
	d) Debit Gain on Sale of Land $100,000; Credit Land $100,000

ACME, Inc. purchased 100% of the outstanding common stock of Smithers, Inc. two years ago. At that time, Smithers, Inc. had land with a BV of $50,000 and a FMV of $250,000, and Smithers, Inc. still owns the land. The current FMV of the land is $350,000. The consolidated balance of that land would be ________ and the consolidation entry relating to the land will be _________.

Question 5 options:

	a) $250,000; Debit to Land of $200,000
	b) $200,000; Debit to Land of $125,000
	c) $250,000; Debit to Land of $125,000
	d) $300,000; Debit to Goodwill of $50,000

Answer 1

Sell price $ 600 000 500 CDO Book Value Gaimon sale $ I OD 000 Elimination Entry at the time of consolidatim would be Debit Gain on Sale of Land $ 200 000 Credit Land $ 2 00000 Thus optio (a) is correct answer