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Patterson Company owns 80% of the outstanding common stock of Stevens Company. On June 30, 2013, landcosting $500,000 is sold by one affiliate to the other for $800,000.Required:Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in theconsolidated financial statements workpaper for the year ended December 31, 2014, assuming that:A. Patterson Company purchased the land from Stevens Company.B. Stevens Company purchased the land from Patterson Company.

User Hoa Vu
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1 Answer

7 votes

Answer:

1. Sale of land by Stevens (subsidiary) - Upstream transaction

General Journal

Date Particulars Debit Credit

31-Dec-14 Retained earnings A/c $240,000

(300,000*80%)

Non controlling interest $60,000

(300,000*20%)

To, Land $300,000

(Being profit on sale eliminated)

2. Sale by Patterson (holding) - Downstream transaction

Date Particulars Debit Credit

31-Dec-14 Retained earnings a/c $300,000

To, Land $300,000

(Being profit on sale earlier recognized by holding eliminated)

User Chaseadamsio
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