Chapter 07
Intercompany Transfers of Noncurrent Assets and Services
Multiple Choice Questions
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:
A. Blue's original cost.
B. Black's original cost.
C. Blue's original cost less Black's recorded gain.
1 D
. . Blue's original cost less 70 percent of Black's recorded gain.
, A parent and its 80 percent owned subsidiary have made several intercompany sales of
noncurrent assets during the past two years. The amount of income assigned to the
noncontrolling interest for the second year should include the noncontrolling interest's
share of gains:
A
.
unrealized in the second year from upstream sales made in the second year.
B
. realized in the second year from downstream sales made in both years.
C
. realized in the second year from upstream sales made in both years.
2 D
. . both realized and unrealized from upstream sales made in the second year.
, Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,
20X8. This purchase followed a series of transactions between P-controlled
subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a
nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19,
20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has
control of the following companies:
Parent reported income from its separate operations of $200,000 for 20X8.
Based on the preceding information, at what amount should the land be reported in the
consolidated balance sheet as of December 31, 20X8?
A. $145,000
B. $220,000
C. $197,000
3
. D. $160,000
, Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,
20X8. This purchase followed a series of transactions between P-controlled
subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a
nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19,
20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has
control of the following companies:
Parent reported income from its separate operations of $200,000 for 20X8.
Based on the preceding information, what amount of gain or loss on sale of land should
be reported in the consolidated income statement for 20X8?
A. $60,000
B. $0
C. $75,000
4
. D. $23,000
Intercompany Transfers of Noncurrent Assets and Services
Multiple Choice Questions
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:
A. Blue's original cost.
B. Black's original cost.
C. Blue's original cost less Black's recorded gain.
1 D
. . Blue's original cost less 70 percent of Black's recorded gain.
, A parent and its 80 percent owned subsidiary have made several intercompany sales of
noncurrent assets during the past two years. The amount of income assigned to the
noncontrolling interest for the second year should include the noncontrolling interest's
share of gains:
A
.
unrealized in the second year from upstream sales made in the second year.
B
. realized in the second year from downstream sales made in both years.
C
. realized in the second year from upstream sales made in both years.
2 D
. . both realized and unrealized from upstream sales made in the second year.
, Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,
20X8. This purchase followed a series of transactions between P-controlled
subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a
nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19,
20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has
control of the following companies:
Parent reported income from its separate operations of $200,000 for 20X8.
Based on the preceding information, at what amount should the land be reported in the
consolidated balance sheet as of December 31, 20X8?
A. $145,000
B. $220,000
C. $197,000
3
. D. $160,000
, Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,
20X8. This purchase followed a series of transactions between P-controlled
subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a
nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19,
20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has
control of the following companies:
Parent reported income from its separate operations of $200,000 for 20X8.
Based on the preceding information, what amount of gain or loss on sale of land should
be reported in the consolidated income statement for 20X8?
A. $60,000
B. $0
C. $75,000
4
. D. $23,000
