Pillar Company owns 70 percent of Salt Company's outstanding common stock.On December 31,20X8,Salt sold equipment to Pillar at a price in excess of Salt's carrying amount,but less than its original cost.On a consolidated balance sheet at December 31,20X8,the carrying amount of the equipment should be reported at:

Question

Quizplus · Accepted Answer

The carrying amount of the equipment should be reported at Pillar's original cost less Salt's recorded gain. This is because Pillar is the majority owner of Salt and therefore, the consolidated financial statements reflect Pillar's ownership in Salt. Therefore, the gain recognized by Salt on the sale of equipment to Pillar is eliminated in consolidation to reflect the transaction as if it had occurred with a third party. Pillar's carrying amount of the equipment will be equal to its original cost less Salt's recorded gain.

Pillar Company Owns 70 Percent of Salt Company's Outstanding Common