Question

On October 6, 2021, Ronan Corp. sold land to Bane Co., its wholly owned subsidiary. The land cost $72,400 and was sold to Bane for $96,000. For consolidated financial statement reporting purposes, when must the gain on the sale of the land be recognized?a. No gain may be recognized.b. As Bane uses the land.c. When Bane Co. sells the land to a third party.d. Proportionately over a designated period of years.e. When Bane Co. begins using the land productively.

Answer 1

c. When Bane Co. sells the land to a third party

Step-by-step explanation:

As in the case of the consolidated financial statement no gain or loss should be recognized when there is an intercompany transactions also it would be removed at the time of consolidation

So the gain that should be recognized at the time of sale of the land would occur when the company sold the land to the third party

Therefore the option c is correct