A parent entity sold a depreciable non-current asset to a subsidiary entity for $5600. The asset originally cost $6000 and at the date of sale accumulated depreciation was $1000. The amount of the unrealised gain on sale to be eliminated is:
A) $5600.
B) $1000.
C) $600.
D) $400.

Question

Quizplus · Accepted Answer

The unrealised gain on sale is the difference between the carrying amount of the asset and the sale price. The carrying amount of the asset is the original cost minus accumulated depreciation, which is $6000 - $1000 = $5000. The sale price is $5600. Therefore, the unrealised gain on sale is $5600 - $5000 = $600.

A Parent Entity Sold a Depreciable Non-Current Asset to a Subsidiary