Assuming the same facts as for Question 12 but that two years later S sold the land outside the group for $1 200 000,the consolidation journal entry required would be (ignoring tax effects):
A)$\begin{array} { l r }
\text { Dr. Opening Retained Earnings } & \$ 900,000 \
\text { Cr. Gain on Sale } & \$ 900,000
\end{array}$
B)$\begin{array} { l r }
\text { Dr. Opening Retained Earnings } & \$ 1,100,000 \
\text { Cr. Gain on Sale } & \$ 1,100,000
\end{array}$
C)$\begin{array} { l r }
\text { Dr. Opening Retained Earnings } & \$ 200,000 \
\text { Cr. Gain on Sale } & \$ 200,000
\end{array}$
D)no entry required

Question

Assuming the same facts as for Question 12 but that two years later S sold the land outside the group for $1 200 000,the consolidation journal entry required would be (ignoring tax effects): 
A)$\begin{array} { l r } 
\text { Dr. Opening Retained Earnings } & \$ 900,000 \
\text { Cr. Gain on Sale } & \$ 900,000
\end{array}$
B)$\begin{array} { l r } 
\text { Dr. Opening Retained Earnings } & \$ 1,100,000 \
\text { Cr. Gain on Sale } & \$ 1,100,000
\end{array}$
C)$\begin{array} { l r } 
\text { Dr. Opening Retained Earnings } & \$ 200,000 \
\text { Cr. Gain on Sale } & \$ 200,000
\end{array}$
D)no entry required

Quizplus · Accepted Answer

The gain on sale is calculated as the difference between the sale price and the carrying value of the land. The carrying value of the land is the original cost of $300,000 plus the accumulated depreciation of $200,000, for a total of $500,000. Therefore, the gain on sale is $1,200,000 - $500,000 = $700,000. The consolidation journal entry to record the gain on sale would be:Dr. Opening Retained Earnings $700,000Cr. Gain on Sale $700,000