[Topic 5] Chapter 15 and Chapter 6 Flashcards
A parent sold land costing P1 million to its subsidiary for P1.2 million in 20x2. The subsidiary still holds the land at the end of 20x4. On a working paper prepared to consolidate the financial statements of the parent and subsidiary in 20x4, the eliminating entry connected with this land includes a credit to
Gain on sale of land, to eliminate the gain recorded on the parent’s books
From a consolidated point of view, the intercompany gain on a parent company’s sale of a depreciable plant asset to the subsidiary is realized when:
Some other transaction or event takes place
A parent provides administrative services to its subsidiary during 20x4, which the subsidiary records as an expense. The services cost the parent P100,000 and the parent charged the subsidiary P125,000. On the consolidation working paper, what elimination entry is necessary?
Debit service revenue P125,000, credit service expense P125,000
A parent sold land costing P1,000,000 to its subsidiary in 20x2 for P800,000. The land is still held by the subsidiary. The parent owns 80% of its subsidiary. The eliminating entry necessary for this intercompany transaction on the 20x4 consolidation working paper includes:
a debit to the Investment account for P640,000
If a gain on an intercompany transaction is attributable to a partially owned subsidiary, working paper eliminations (in journal entry format) for accounting periods subsequent to the period of the intercompany transaction will include a debit to Minority Interest in Net Assets of Subsidiary unless the gain arose from:
An acquisition of outstanding bonds in the open market
The purchase of a subsidiary’s bond payable from an independent investor by another subsidiary is called what type of transaction?
Lateral intercompany transaction
In the period of an intercompany asset transaction, the consolidated balance sheet will present what amount in the asset account?
the purchase price by the original owner
When there is an intercompany transaction, how much of any profit or loss created as a result of the transaction is eliminated during the consolidation process?
All of the profit or loss is eliminated
When there is an intercompany sale of plant assets during the period, the depreciation expense recognized prior to the sale has no impact on the worksheet elimination to remove the intercompany sale from the consolidated financial statements.
TRUE
If the intercompany sale of plant assets occurs at the end of the accounting period, there will not be an adjustment to accumulated depreciation when the consolidation worksheet eliminations are prepared.
TRUE
A parent sold land costing P1 million to its subsidiary for P1.2 million in 20x2. The subsidiary still holds the land at the end of 20x4. On a working paper prepared to consolidate the financial statements of the parent and subsidiary in 20x4, the eliminating entry connected with this land includes a credit to
Gain on sale of land, to eliminate the gain recorded on the parent’s books
A parent company sells land to its subsidiary in 20x1 at an amount above its original cost. In 20x4, three years later, the subsidiary sells the land to an outside developer. In the 20x4 consolidation working paper, the elimination of this transaction will result in a(n)
increase in gain on sale of land
If the intercompany sale of plant assets occurs at the end of the accounting period, there will not be an adjustment to depreciation expense when the consolidation worksheet eliminations are prepared
TRUE
In the measurement of minority interest in net income of a partially owned subsidiary, the credit for Depreciation Expense– Parent in the working paper elimination (in journal entry format) for intercompany gain in a depreciable plant asset is attributed to net income of:
The subsidiary
The sale of equipment from the subsidiary to the parent is called what type of transaction?
upstream intercompany transaction
