If S sells equipment previously purchased from P before that

If S sells equipment previously purchased from P before that equipment is fully depreciated, how does that affect the consolidated entity?

Select one:

A. The consolidated statements must realize the remainder of the unrealized gain that has been deferred

B. Generally, the gain recorded by S will be increased in order to reflect the consolidated entity’s gain

C. When calculating the consolidated gain, the book value of the equipment must reflect the consolidated entity’s book value rather than S’s book value

D. All three answers are correct

If S sells equipment to P at a gain, what entries are included in P’s books if it uses the complete equity method?

Select one:

A. A – P decreases its equity in S income for its share of unrealized gain on the sale.

B. P does neither A nor B.

C. P does both A and B.

D. B – P increases its equity in S income for the depreciation adjustment.

What is the general format of the elimination entries to reflect intercompany interest or rent?

Select one:

A. Debit income, credit expense

B. Debit payable, credit receivable

C. Debit expense, credit income

D. Debit receivable, credit payable

When land involved in an intercompany sale is sold to outsiders, the gain on the sale of that land is

Select one:

A. Decreased by the total unrealized gain from the original sale

B. Increased by the total unrealized gain from the original sale

C. Decreased by the remaining unrealized gain from the original sale

D. Increased by the remaining unrealized gain from the original sale