P Company Purchased Land from Its 80% Owned Subsidiary at a Cost

question 21

Multiple Choice

P Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiary's book value. Two years later P sold the land to an outside entity for $50,000 more than P's cost. In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of:

• A) $50,000.
• B) $120,000.
• C) $130,000.
• D) $150,000.

Understand the basic definitions and roles involved in a leasing agreement.

Identify the types of leases and their characteristics.

Understand the concept of a financial lease and its implications for both lessee and lessor.

Explain the factors leading to the proliferation of consumer auto leasing.

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Definitions:

Replacement Cost

The cost to replace an asset with another of similar function and quality in its current condition.

Historical Cost

The original monetary value of an asset or expense as recorded at the time of acquisition or incurrence, without adjusting for inflation or changes in value.

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, not involving forced sale or liquidation.

Weighted Average

A mathematical calculation that takes into account both the magnitude and the significance of each number in a set to find an average value weighted by importance or size.