Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31,2009,include the following balances for land: for Chain--$416,000,and for Shannon--$256,000.On the original date of acquisition,the book value of Shannon's land was equal to its fair value.On April 4,2010,Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transactions which affected the companies' land accounts during 2010.What is the consolidated balance for land on the 2010 balance sheet?

Question

Quizplus · Accepted Answer

The consolidated balance for land should eliminate the intercompany profit from the sale of land. Chain's land was $416,000, and Shannon's was $256,000. The land sold by Chain to Shannon had a book value of $65,000 but was sold for $83,000, creating an unrealized gain of $18,000. The consolidated land balance is $416,000 + $256,000 - $18,000 = $654,000.

Chain CoOwned All of the Voting Common Stock of Shannon Corp