P Corp. owns 90% of the outstanding common stock of S Company. On December 31, 2017, S sold equipment to P for an amount greater than the equipment's book value but less than its original cost. The equipment should be reported on the December 31, 2017 consolidated balance sheet at:
A) P's original cost less 90% of S's recorded gain.
B) P's original cost less S's recorded gain.
C) S's original cost.
D) P's original cost.

Question

Quizplus · Accepted Answer

The equipment should be reported at P's original cost less S's recorded gain to eliminate the intercompany profit from the consolidated financial statements.

P Corp Owns 90% of the Outstanding Common Stock of S