The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. $$\begin{array} { | l | l | r | r | }
\hline \mathrm { Dr } & \text { Profit on sale of investment } & 500000 & \
\hline \mathrm { Dr } & \text { Loss on sales of subsidiary } & 250000 & \
\hline \mathrm { Cr } & \text { Profit after tax } & & 179000 \
\hline \mathrm { Cr } & \text { Retained earnings } & & 271000 \
\hline \mathrm { Cr } & \text { Revaluation reserve } & & 300000 \
\hline
\end{array}$$ At the time of the sale of the shares,the parent was holding the investment in subsidiary at what amount,in its own books?
A) $450 000
B) $700 000
C) $950 000
D) $1 450 000

Question

The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. $$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Profit on sale of investment } & 500000 & \
\hline \mathrm { Dr } & \text { Loss on sales of subsidiary } & 250000 & \
\hline \mathrm { Cr } & \text { Profit after tax } & & 179000 \
\hline \mathrm { Cr } & \text { Retained earnings } & & 271000 \
\hline \mathrm { Cr } & \text { Revaluation reserve } & & 300000 \
\hline
\end{array}$$ At the time of the sale of the shares,the parent was holding the investment in subsidiary at what amount,in its own books?
A) $450 000
B) $700 000
C) $950 000
D) $1 450 000

Quizplus · Accepted Answer

The parent was holding the investment in the subsidiary at $700,000. This is calculated by subtracting the profit on sale of investment ($500,000) from the amount received for the shares ($1,200,000). The loss on sale of subsidiary is a separate transaction and does not affect the carrying amount of the investment.

The Following Consolidation Adjusting Journal Entries Appeared at the End