Chapter 07 – Intercompany Transfers of Noncurrent Assets and Services
E7-2 (continued)
5.
b –
Reported net income of Gold Company
$ 45,000
Reported gain on sale of equipment
$15,000
Intercompany profit realized in 20X6
(5,000)
(10,000)
Realized net income of Gold Company
$ 35,000
Proportion of stock held by
noncontrolling interest
x .40
Income assigned to noncontrolling interests
$ 14,000
6.
c –
Operating income reported by Top Corporation
$ 85,000
Net income reported by Gold Company
45,000
$130,000
Less: Unrealized gain on sale of equipment
($15,000 – $5,000)
(10,000)
Consolidated net income
$120,000
E7-3 Consolidation Entries for Land Transfer
a.
Consolidation entry, December 31, 20X4:
Gain on Sale of Land
10,000
Land
10,000
The basic entry (not shown) would be adjusted by 10,000 of deferred gain
on land to complete the elimination process.
Consolidation entry, December 31, 20X5:
Investment in Lowly
10,000
Land
10,000
The basic entry (not shown) would complete the elimination process.
b.
Consolidation entry, December 31, 20X4:
Gain on Sale of Land
10,000
Land
10,000
The basic entry (not shown) would be adjusted by 10,000 of deferred gain
on land to complete the elimination process.
Consolidation entry, December 31, 20X5:
Investment in Lowly
6,000
NCI in NA of Lowly
4,000
Land
10,000
