Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31, 2017, include the following balances for land: for Chain--$416,000, and for Shannon--$256,000.On the original date of acquisition, the book value of Shannon's land was equal to its fair value.On April 4, 2018, Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transfers, which affected the companies' land accounts during 2017.What is the consolidated balance for land on the 2018 balance sheet?
A) $672,000.
B) $690,000.
C) $755,000.
D) $737,000.
E) $654,000.

Question

Quizplus · Accepted Answer

The consolidated balance for land is the sum of the book values of land for both companies, minus any unrealized gain from intercompany transactions. Chain's land is $416,000, Shannon's is $256,000, totaling $672,000. The intercompany sale of land from Chain to Shannon resulted in an unrealized gain of $18,000 ($83,000 - $65,000), which must be eliminated. Therefore, the consolidated balance is $672,000.

Chain CoOwned All of the Voting Common Stock of Shannon Corp