Discuss effect of intercompany sale of land
Sam Corporation is a 90 percent-owned subsidiary of Par Corporation, acquired by Par in 2011. During 2014 Par sells land to Sam for $50,000 for which it paid $25,000. Sam owns this land at December 31, 2014.
REQUIRED
1. How and in what amount will the sale of land affect Par’s income from Sam and net income for 2014 and the balance of Par’s Investment in Sam account on December 31, 2014?
2. How will the consolidated financial statements of Par Corporation and Subsidiary for 2014 be affected by the intercompany sale of land?
3. If Sam still owns the land at December 31, 2015, how will Par’s income from Sam and net income for 2015 be affected and what will be the effect on Par’s Investment in Sam account on December 31, 2015?
4. If Sam sells the land during 2016 for $50,000, how will Par’s income from Sam and total consolidated income for 2016 be affected?
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