Stroud Corporation is an 80%-owned subsidiary of Pennie, Inc., acquired by Pennie several years ago.On January 1, 2017, Pennie sold land with a book value of $60,000 to Stroud for $90,000.Stroud resold the land to an unrelated party for $100,000 on September 26, 2018.The land will be included in the December 31, 2017 consolidated balance sheet of Pennie, Inc.and Subsidiary at ____.

Question

Quizplus · Accepted Answer

u200bIn consolidated financial statements, intercompany transactions are eliminated to present the financial position and results of operations of the parent and its subsidiaries as if they were a single economic entity. Since Pennie, Inc. sold the land to its subsidiary, Stroud Corporation, the sale is considered an intercompany transaction and must be eliminated. The land should be reported at its original book value to the consolidated entity, which is $60,000, before the intercompany sale took place.

Stroud Corporation Is an 80%-Owned Subsidiary of Pennie, Inc