Question

A parent sells land to its subsidiary for 25,000, and shows a loss of 4,000. At what amount should the land be shown on the consolidated balance sheet?

Answer 1

The land should be shown on the consolidated balance sheet at the amount it was sold for, which is $25,000.

Step-by-step explanation:

The land should be shown on the consolidated balance sheet at the amount it was sold for, which is $25,000. The loss of $4,000 would be reflected as a reduction in the parent's equity on the consolidated balance sheet.

When a parent company sells land to its subsidiary, the consolidated balance sheet should eliminate any intercompany transactions to avoid double counting. In this case, a parent company sold land to a subsidiary, realizing a loss of $4,000. Therefore, on the consolidated balance sheet, the land should be shown at the historical cost to the parent, before the sale, unless the fair value of the land is different and if the loss represents an impairment in value. This would mean the land is reported at the amount it was on the parent company's books before the sale, less the loss, only if this value represents the new fair value.