Company A holds 70 percent of the voting shares of Company B.During 2008,Company B sold land with a book value of $125,000 to Company A for $150,000.Company A continues to hold the land at the end of the year.The companies file separate tax returns and are subject to a 40 percent tax rate.Assume that Company A uses the basic equity method in accounting for its investment in Company B.
-Based on the information given,which eliminating entry relating to the intercorporate sale of land is to be entered in the consolidation workpaper prepared at the end of 2008?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Quizplus · Accepted Answer

The eliminating entry is to eliminate the gain on the sale of land from Company B's income and to record the land at its fair value in the consolidated financial statements.

Company a Holds 70 Percent of the Voting Shares of Company