| Posted: 23 Jul 2010 at 23:29 | IP Logged
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Papa Company acquired land with an office building on
it from its subsidiary, Sonny Company, for $110,000. Prior to the
sale, Sonny's carrying value of the land was $60,000 and its net
carrying value of the building was $50,000. At the time of the
transaction, Papa appropriately determined that the land had a fair
value of $75,000 and the building had a fair value of $35,000. At what
amount should the land and building be reported on Papa's consolidated
statements prepared immediately after the transaction?
| Land
| Building
|
 | $75,000 | $35,000 |
| $55,000 | $55,000 |
 | $60,000 | $50,000 |
| Even
though there was no profit or loss on the intercompany transaction, it
resulted in amounts being redistributed between the depreciable asset
office building and the non-amortizable asset land, which would result
in different amounts of depreciation expense than if the transaction had
not occurred. Therefore, the intercompany transaction must be
"eliminated" so that the consolidated statements would show land at
$60,000 and buildings at $50,000. (Sonny also would need to assess the
building for possible impairment.)
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| $50,000 |
i did not understand the explanation.can someone explain?
__________________
BEC-74,82(lost credit),78
FAR-67,80
AUD-75
REG-68,72,79
|
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