A non-current asset was sold by Subsidiary Limited to Parent Limited during the 2006-07 financial year. The carrying amount of the asset at the time of the sale was $700,000. As part of the consolidation process, the following journal entry was passed.

What (a) amount did Parent Limited pay Subsidiary Limited for the asset; (b) was the cost of the asset as shown in the books of Subsidiary Limited?
A) (a) $900,000; (b) $1,400,000
B) (a) $900,000; (b) $1,200,000.
C) (a) $700,000; (b) $1,200,000
D) (a) $900,000; (b) $800,000
E) Cannot determine from the information provided.

Question

A non-current asset was sold by Subsidiary Limited to Parent Limited during the 2006-07 financial year. The carrying amount of the asset at the time of the sale was $700,000. As part of the consolidation process, the following journal entry was passed.

What (a) amount did Parent Limited pay Subsidiary Limited for the asset; (b) was the cost of the asset as shown in the books of Subsidiary Limited?

What (a) amount did Parent Limited pay Subsidiary Limited for the asset; (b) was the cost of the asset as shown in the books of Subsidiary Limited?
A) (a) $900,000; (b) $1,400,000 
B) (a) $900,000; (b) $1,200,000. 
C) (a) $700,000; (b) $1,200,000 
D) (a) $900,000; (b) $800,000 
E) Cannot determine from the information provided.

Quizplus · Accepted Answer

According to the journal entry, Parent Limited paid $900,000 for the asset, which was $200,000 more than the carrying amount. Therefore, the cost of the asset as shown in the books of Subsidiary Limited was $1,200,000 ($700,000 + $500,000 gain on sale).

A Non-Current Asset Was Sold by Subsidiary Limited to Parent