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Renner Company sold land to Bethany Enterprises, its parent, on June 1, 2020. The sale price...

Renner Company sold land to Bethany Enterprises, its parent, on June 1, 2020. The sale price was $218,000. The land originally cost Renner $239,000. Renner reported net income of $400,000 and $496,000 for 2020 and 2021, respectively. Bethany sold the land it purchased from Renner for $228,000 in 2022.

What is the balance in the pre-consolidation Income (loss) from Subsidiary account for 2020?

a. 379,000

b.400,000

c. 411,000

d. 421,000

I got answer D but not sure if its right. please help with explanation.

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Answer #1

Income from sale of land = Sale price - Basis

= $218,000 - $239,000

= ($21,000)

Pre consolidation net income is $400,000 as reported by Renner as this loss of $21,000 is already included in the net income.

The answer is B.

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