When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation?
A) Dr Asset Cr Cash
B) Dr Cash Cr Asset
C) Dr Gain on sale Cr Asset
D) Dr Asset Cr Gain on sale

Question

Quizplus · Accepted Answer

When a non-current asset is sold at a profit to another entity within the same group, the gain on sale needs to be eliminated on consolidation. Therefore, the adjustment required would be to debit Gain on sale and credit the Asset account. Hence, option C - Dr Gain on sale, Cr Asset - is the correct choice. The other options are incorrect because they do not reflect the correct treatment of the gain on sale.

When an Entity Sells a Non-Current Asset at a Profit