Company a Holds 70 Percent of the Voting Shares of Company

question 23

Multiple Choice

Company A holds 70 percent of the voting shares of Company B.During 2008,Company B sold land with a book value of $125,000 to Company A for $150,000.Company A continues to hold the land at the end of the year.The companies file separate tax returns and are subject to a 40 percent tax rate.Assume that Company A uses the basic equity method in accounting for its investment in Company B.
-Assume the Company A holds the land at the end of 2009.Based on the information given,the eliminating entry relating to the intercorporate sale of land to be entered in the consolidation workpaper prepared at the end of 2009 will include:

• A)a debit to Retained Earnings for $7,500.
• B)a debit to Noncontrolling Interest for $4,500.
• C)a credit to Land for $150,000.
• D)a credit to Land for $15,000.

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Definitions:

Rational Model

A decision-making process that involves identifying a problem, generating alternative solutions, selecting the best option, and implementing it, assuming a logical and systematic approach.

Completely Rational

Refers to the assumption that individuals make decisions based on fully logical reasoning and have full information available to them.

Rational Model

A decision-making model based on logical and objective analysis of alternatives, aiming for the most optimal solution.

Inconsistent System

A framework or structure within which processes and practices frequently change, leading to confusion or inefficiency.