Sky Corporation owns 75 percent of Earth Company's stock.On July 1,20X8,Sky sold a building to Earth for $33,000.Sky had purchased this building on January 1,20X6,for $36,000.The building's original eight-year estimated total economic life remains unchanged.Both companies use straight-line depreciation.The equipment's residual value is considered negligible.
-Based on the information provided,in the preparation of the 20X8 consolidated financial statements,building will be _____ in the eliminating entries.

Question

Quizplus · Accepted Answer

The eliminating entry will debit the building account for $3,000, which is the difference between the book value of the building on Sky's books ($36,000 - $33,000 = $3,000) and the book value of the building on Earth's books ($33,000).

Sky Corporation Owns 75 Percent of Earth Company's Stock