Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?
A) A gain will be recognized in the consolidated income statement in 2016.
B) A gain will be recognized in the consolidated income statement in 2019.
C) No gain will be recognized in the 2019 consolidated income statement.
D) Only the parent company will recognize a gain in 2019.
E) The subsidiary will recognize a gain in 2016.

Question

Quizplus · Accepted Answer

The gain from the sale of land to an unrelated third party will be recognized in the consolidated income statement in 2019, as the gain is realized upon sale to an external party.

Parent Sold Land to Its Subsidiary Resulting in a Gain