A parent sells land to its 80%-owned subsidiary at a gain of $100,000. The following year, the subsidiary sells the land to an outside entity for a gain of $10,000. How is the noncontrolling interest in net income affected in the year the subsidiary sells the land?

Question

Quizplus · Accepted Answer

The noncontrolling interest in net income is not affected by the intra-group sale of land or its subsequent sale to an outside entity. The initial gain of $100,000 on the sale from parent to subsidiary is eliminated in consolidation, and the gain realized by the subsidiary upon selling to an outside party is fully recognized in the consolidated financial statements, affecting all shareholders proportionately.

A Parent Sells Land to Its 80%-Owned Subsidiary at a Gain