When an entity sells a non-depreciable non-current asset during the current period at a profit to another entity within the same group the following adjustment is necessary on consolidation at the end of the period:
A) DR Asset CR Cash
B) DR Gain on sale CR Asset
C) DR Cash CR Asset
D) DR Asset CR Gain on sale.

Question

Quizplus · Accepted Answer

When a non-depreciable non-current asset is sold at a profit to another entity within the same group, the gain on sale must be eliminated on consolidation to avoid double counting. Therefore, the entry on consolidation should be to debit the Gain on Sale account (which appears on the selling entity's income statement) and credit the Asset account (which represents the non-current asset being sold). This is reflected in choice B, which is the correct answer. The other options either do not reflect the elimination of the gain on sale or are not applicable to this situation.

When an Entity Sells a Non-Depreciable Non-Current Asset During the Current