P Company sells land to its 70% owned subsidiary, S Company, at a gain of $60,00
ID: 2405341 • Letter: P
Question
P Company sells land to its 70% owned subsidiary, S Company, at a gain of $60,000. What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year?
consolidated net income will be $60,000 less than it would had the sale not occurred.
consolidated net income will be $60,000 greater than it would had the sale not occurred.
consolidated net income will be the same as if the sale had not occurred.
consolidated net income will be $42,000 less than it would had the sale not occurred.
consolidated net income will be $60,000 less than it would had the sale not occurred.
B.consolidated net income will be $60,000 greater than it would had the sale not occurred.
C.consolidated net income will be the same as if the sale had not occurred.
D.consolidated net income will be $42,000 less than it would had the sale not occurred.
Explanation / Answer
The correct option is C. Consolidated Net Income will be the same as if the sale had not occurred.
In computing consolidated income, the objective is to restated the accounts as if the intercompany transactions had not occurred.
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