contestada

Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer. The subsidiary sold the land to an unrelated third party for a gain in 2019. Which of the following statements is true?a) A gain will be recognized in the consolidated income statement in 2019.

b) The subsidiary will recognize a gain in 2016.

c) No gain will be recognized in the 2019 consolidated income statement.

d) Only the parent company will recognize a gain in 2019.

e) A gain will be recognized in the consolidated income statement in 2016.

Respuesta :

TomShelby

Answer:

a) A gain will be recognized in the consolidated income statement in 2019.

Explanation:

As the land is sold to a subsidiary it will be considered intra-entity thus, eliminated in the consolidated income statement of 2016

the gain of both entities (from parent to subsidiary and to subsidiary to third party) will be recognized at 2019 when an external entity purchases the land