When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation?
A) Dr Gain on sale, CR Asset
B) Dr Asset, CR Cash
C) Dr Gain on sale, CR Cash
D) Dr Asset, DR Gain on sale

Question

Quizplus · Accepted Answer

When a non-current asset is sold at a profit within the same group, a gain on sale is recognized. Therefore, on consolidation, this gain needs to be eliminated to avoid double counting. The adjustment required would be to debit the gain on sale and credit the asset sold.

When an Entity Sells a Non-Current Asset at a Profit