In an Acquisition of Land by a Parent from a Subsidiary

question 59

Multiple Choice

In an acquisition of land by a parent from a subsidiary, the realization of profit acquired on the land acquisition is recorded in the consolidated financial statements?

• A)In the first year that the group's consolidated financial statements are prepared.
• B)When the asset is subsequently sold to a party outside of the group.
• C)As it is amortized over the period of the life of the other assets.
• D)No profit will be realized because land is not amortized.

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Definitions:

Sales Revenue

The total amount of money earned from goods and services sold before any expenses are subtracted.

Goodwill

An intangible asset that arises when a company acquires another business for a price higher than the fair value of its net identifiable assets and liabilities.

Cost Method

An accounting method used to value an investment, where the investment is recorded at its original cost without adjusting for market changes.

Consolidated Balance Sheet

A financial statement that combines the assets, liabilities, and equity of a parent company and its subsidiaries into one document.