thendasor the end of 206 Pr ert Co pery sold a d that ongina

the-ndasor the end of 20.6. Pr ert Co pery sold a d that onginal y eo tsso oto Sub Co pa , a90% ? edsubsida y of Parent Company, .t \' S70D O trans erprice duri g 2016. SubO How much gain will Parent initialy recognize for the transfer? Omit dollar signs and cents from your answer. (Example: 5000 #your enswer is $5000) pany stl o

Solution

Gain on sale Recognized = $70,000 - $50,000 = $20,000
Its downstream sale ,the profit on intercompany transfer is recognized entirely by the parent and is included in Parent\'s retained earnings in subsequent years as long as the land is held by the subsidiary.
Eliminating Journal entry=
Retained Earnings Dr. $20,000
   Land Cr. $20000