Blue Company owns 70 percent of Black Company's outstanding common stock.On December 31,20X8,Black sold equipment to Blue at a price in excess of Black's carrying amount,but less than its original cost.On a consolidated balance sheet at December 31,20X8,the carrying amount of the equipment should be reported at:

Question

Quizplus · Accepted Answer

The consolidated financial statements should reflect the economic reality of the transaction between Blue and Black. Blue owns 70% of Black and the equipment was sold to Blue from Black. Therefore, the equipment's carrying amount on the consolidated balance sheet should be reported at Blue's original cost, less the amount of the gain that Black recorded on the sale. This results in Option C being the correct choice.

Blue Company Owns 70 Percent of Black Company's Outstanding Common