In 2011, a Parent Company Sold a Tract of Land $\begin{array}{lll} \text { Decrease Retained earnings } & 60,000 \\ \text { Decrease Land } & 60,000 & \\\end{array}$

question 7

Short Answer

In 2011, a parent company sold a tract of land to its subsidiary for $200,000, resulting in a $60,000 loss. The subsidiary's plans for the land did not materialize and it still owned the land at the end of 2014. At the end of 2014, what consolidation adjustments should be made with respect to the loss associated with the sale of land? a)
$\begin{array}{lll} \text { Decrease Retained earnings } & 60,000 \\ \text { Decrease Land } & 60,000 & \\\end{array}$

b)
$\begin{array}{lll} \text { Decrease Loss on the sale of land } & 60,000 \\\text { Decrease Land } & 60,000 & \\\end{array}$

c)
$\begin{array}{lll} \text { Increase Land } & 60,000 & \\\text { Increase Loss on the sale of land } & 60,000 \\\end{array}$

d)
$\begin{array}{lll}\text { Increase Land } & 60,000 & \\ \text { Increase Retained earnings } & 60,000 \end{array}$

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Definitions:

Producer Surplus

The additional income a producer receives for selling a good or service above its production cost.

Tax

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization.

Consumer Surplus

The discrepancy between the amount consumers are prepared to spend on a product or service and the actual price they pay.

Consumer Surplus

The gulf between the aggregate amount consumers are willing to allocate for a good or service and what they actually end up paying.