Parent Sold Land to Its Subsidiary Resulting in a Gain

question 14

Multiple Choice

Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?

• A) A gain will be recognized in the consolidated income statement in 2016.
• B) A gain will be recognized in the consolidated income statement in 2019.
• C) No gain will be recognized in the 2019 consolidated income statement.
• D) Only the parent company will recognize a gain in 2019.
• E) The subsidiary will recognize a gain in 2016.

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Definitions:

Proportions

A mathematical or statistical relationship between quantities or amounts.

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