Question

if a subsidiary sells equipment previously purchased from the parent before that equipment is fully depreciated, how does that sale by the subsidiary affect the consolidated entity? multiple choice the consolidated statements must realize the remainder of the unrealized gain that has been deferred. the carrying amount of the equipment must reflect the consolidated entity's carrying amount rather than the subsidiary's carrying amount. generally, the gain recorded by the subsidiary will be increased to reflect the consolidated entity's gain. all the statements are true.

Answer 1

When a subsidiary sells equipment previously purchased from the parent before it is fully depreciated, it affects the consolidated entity by realizing deferred gains, adjusting the carrying amount, and increasing the recorded gain.

Step-by-step explanation:

When a subsidiary sells equipment previously purchased from the parent before that equipment is fully depreciated, it affects the consolidated entity in the following ways:

1. The consolidated statements must realize the remainder of the unrealized gain that has been deferred.
2. The carrying amount of the equipment must reflect the consolidated entity's carrying amount rather than the subsidiary's carrying amount.
3. Generally, the gain recorded by the subsidiary will be increased to reflect the consolidated entity's gain.

Therefore, all the statements provided in the question are true.