Chain Co. owned all of the voting common stock of Shannon Corp. The corporations' balance sheets dated December 31, 2010, include the following balances for land: for Chain--$416,000, and for Shannon--$256,000. On the original date of acquisition, the book value of Shannon's land was equal to its fair value. On April 4, 2011, Chain sold to Shannon a parcel of land with a book value of $65,000. The selling price was $83,000. There were no other transactions which affected the companies' land accounts during 2010. What is the consolidated balance for land on the 2011 balance sheet?
A) $672,000.
B) $690,000.
C) $755,000.
D) $737,000.
E) $654,000.

Question

Quizplus · Accepted Answer

The consolidated balance for land should eliminate the intercompany profit from the sale of land. Chain's land is $416,000, Shannon's land is $256,000, and the intercompany sale profit is $18,000 ($83,000 - $65,000). Therefore, the consolidated land balance is $416,000 + $256,000 - $18,000 = $654,000.

Chain Co Owned All of the Voting Common Stock of Shannon