Question 3 When S disposes of an asset prematurely and recor

Question 3 When S disposes of an asset prematurely and records a gain, how does that affect the consolidated financial statements? O A S cannot record a gain on the sale of the asset. B. P records on its books the gain on the sale. C. The workpaper must include an entry to eliminate S\'s gain against P\'s reported income. 0 D. The workpaper must include an entry to adjust S\'s gain or loss to reflect the gain or loss to the consolidated entity.

Solution

When error is done by the S company in complying with GAAP, it will be the duty of P company to make it adjusted in such a way that affect of such error is nullified. So it must include an entry to eliminate S\'s gain against P\'s reported Income.

So .......... Select - Option - C