Exam 7: Intercompany Transfers of Services and Noncurrent Assets

A parent sold land to its partially owned subsidiary during the year at a loss.The subsidiary continues to hold the land at the end of the year.The amount to be reported as consolidated net income for the year should equal:

PeopleMag sells a plot of land for $100,000 to Seven Star Company,its 100 percent owned subsidiary,on January 1,20X7.The cost of the land was $75,000,when it was purchased in 20X6.In 20X9,Seven Star sells the land to Hot Properties Inc. ,an unrelated entity,for $120,000.How is the land reported in the consolidated financial statements for 20X7,20X8 and 20X9?

Blue Corporation holds 70 percent of Black Company's voting common stock.On January 1,20X3,Black paid $500,000 to acquire a building with a 10-year expected economic life.Black uses straight-line depreciation for all depreciable assets.On December 31,20X8,Blue purchased the building from Black for $180,000.Blue reported income,excluding investment income from Black,of $140,000 and $162,000 for 20X8 and 20X9,respectively.Black reported net income of $30,000 and $45,000 for 20X8 and 20X9,respectively. -Based on the preceding information,the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X9 will be:

Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1,20X7.On December 31,20X8,Mortar received $390,000 from Granite for equipment Mortar had purchased on January 1,20X5,for $400,000.The equipment is expected to have a 10-year useful life and no salvage value.Both companies depreciate equipments on a straight-line basis. -Based on the preceding information,the gain on sale of the equipment recorded by Mortar for 20X8 is:

Blue Company owns 70 percent of Black Company's outstanding common stock.On December 31,20X8,Black sold equipment to Blue at a price in excess of Black's carrying amount,but less than its original cost.On a consolidated balance sheet at December 31,20X8,the carrying amount of the equipment should be reported at:

Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1,20X7.On December 31,20X8,Mortar received $390,000 from Granite for equipment Mortar had purchased on January 1,20X5,for $400,000.The equipment is expected to have a 10-year useful life and no salvage value.Both companies depreciate equipments on a straight-line basis. -Based on the preceding information,in the preparation of the 20X8 consolidated financial statements,equipment will be: