Company S sells equipment to its parent company (P) at a gain. In years subsequent to the year of the intercompany sale, a workpaper entry is made under the cost method debiting:

Question

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In the years subsequent to the year of the intercompany sale, a workpaper entry under the cost method would involve debiting all of these options: Retained Earnings - P (to eliminate any recognized intercompany profit that inflated P's retained earnings), Noncontrolling interest (to adjust for the impact of the intercompany sale on the noncontrolling interest's share of net assets), and Equipment (to adjust the carrying amount of the equipment to its original cost, eliminating the effect of the intercompany gain).

Company S Sells Equipment to Its Parent Company (P) at a Gain