A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2 800. The asset originally cost $3 000 when acquired from an external party and at the date of intragroup sale the accumulated depreciation was $500. The amount of the unrealised gain on the intragroup sale to be eliminated is:

Question

Quizplus · Accepted Answer

The subsidiary is purchasing the asset from the parent entity group, hence the transaction is considered an intragroup sale. Intragroup transactions should be eliminated from consolidation to avoid double-counting of financial transactions. 
The carrying amount of the asset at the date of sale is the original cost of $3,000 minus accumulated depreciation of $500 = $2,500. 
The selling price of the asset is $2,800, which results in a gain of $300 ($2,800 - $2,500). 
This gain is unrealized as it only occurs within the group and not with external parties. It needs to be eliminated during consolidation. Therefore, the amount of the unrealised gain on the intragroup sale to be eliminated is: $300.

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