Parent sells plant to Subsidiary for $500 000 on January 1 20X9.The original cost to Parent was $400 000 on 1 January 20X7.The plant is depreciated straight line over ten years with no scrap value.
The correct consolidation elimination entry for the plant, at 1 January 20X9, is:
$\begin{array}{llcc}
\text { Dr Profit on sale } &\$ 100000 \
\text {Cr Plant } &&\$ 100000 \
\end{array}$

Question

Parent sells plant to Subsidiary for $500 000 on January 1 20X9.The original cost to Parent was $400 000 on 1 January 20X7.The plant is depreciated straight line over ten years with no scrap value.
The correct consolidation elimination entry for the plant, at 1 January 20X9, is:
$\begin{array}{llcc}
  \text { Dr Profit on sale } &\$ 100000   \
 \text {Cr Plant  } &&\$ 100000 \
\end{array}$

Quizplus · Accepted Answer

The elimination entry for the plant should be:
Dr Plant (to eliminate intercompany sale) $500,000
Cr Retained earnings (to reverse depreciation taken by Parent) $40,000
Cr Deferred tax liability (to reverse deferred tax impact of difference in depreciation) $16,000
There is no need for a profit on sale or loss on sale in this scenario because the sale was at the original cost.

Parent Sells Plant to Subsidiary for $500 000 on January Dr Profit on sale $100000Cr Plant $100000\begin{array}{llcc} \text { Dr Profit on sale } &\$ 100000 \\ \text {Cr Plant } &&\$ 100000 \\\end{array} Dr Profit on sale Cr Plant ​$100000​$100000​

Parent Sells Plant to Subsidiary for $500 000 on January $\begin{array}{llcc} \text { Dr Profit on sale } &\$ 100000 \\ \text {Cr Plant } &&\$ 100000 \\\end{array}$