chapter 7-1. chapter 7-2 elimination of unrealized gains or losses on intercompany sales of property...

Chapter 7-1

Chapter 7-2

Elimination of UnrealizedElimination of UnrealizedGains or Losses onGains or Losses onIntercompany Sales ofIntercompany Sales ofProperty and EquipmentProperty and Equipment

Advanced Accounting, Third Edition

7777

Chapter 7-3

1. Understand the financial reporting objectives in accounting for intercompany sales of nondepreciable assets on the consolidated financial statements.

2. Explain the additional financial reporting objectives in accounting for intercompany sales of depreciable assets on the consolidated financial statements.

3. Explain when gains or losses on intercompany sales of depreciable assets should be recognized on a consolidated basis.

4. Explain the term “realized through usage.”

5. Describe the differences between upstream and downstream sales in determining consolidated net income and the controlling and noncontrolling interests in consolidated income.

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

Chapter 7-4

6. Compare the eliminating entries when the selling affiliate is a subsidiary (less than wholly owned) versus when the selling affiliate is the parent company.

7. Compute the noncontrolling interest in consolidated net income when the selling affiliate is a subsidiary.

8. Compute consolidated net income considering the effects of intercompany sales of depreciable assets.

9. Describe the eliminating entry needed to adjust the consolidated financial statements when the purchasing affiliate sells a depreciable asset that was acquired from another affiliate.

10. Explain the basic principles used to record or eliminate intercompany interest, rent, and service fees.

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

Chapter 7-5

Intercompany Sales of Nondepreciable Intercompany Sales of Nondepreciable PropertyPropertyIntercompany Sales of Nondepreciable Intercompany Sales of Nondepreciable PropertyProperty

LO 1 Financial reporting objectives nondepreciable property.LO 1 Financial reporting objectives nondepreciable property.

When there have been intercompany sales of nondepreciable property, workpaper entries are necessary to:

Include gains or losses on the sale in consolidated net income only at the time such property is sold to parties outside the affiliated group and in an amount equal to the difference between the cost of the property to the affiliated group and the proceeds received from outsiders.

Present nondepreciable property in the consolidated balance sheet at its cost to the affiliated group.

Chapter 7-6



E7-4 (variation) Procter Company owns 90% of the outstanding stock of Silex Company. On January 1, 2008, Silex Company sold land to Procter Company for $350,000. Silex had originally purchased the land on June 30, 2004, for $200,000.

Procter Company plans to construct a building on the land bought from Silex in which it will house new production machinery. The estimated useful life of the building and the new machinery is 15 years.

Upstream Sale

Chapter 7-7

E7-4 (variation) Entries made on the books of each affiliate to record this intercompany sale in 2008.



Entry on Books of Silex

Cash 350,000

Land 200,000

Gain on sale150,000

Entry on Books of Procter

Land 350,000

Cash 350,000

Additional Entry for Complete Equity Method: Proctor Only

Equity in income135,000

Investment in Silex 135,000

To reduce its income from subsidiary by its share of the intercompany gain ($150,000 x 90%).

Note: No further entries are recorded on the books of Procter until the land is sold to outsiders.

Chapter 7-8

E7-4 B(1). Prepare the workpaper entries necessary because of the intercompany sale of land for the year ended December 31, 2008.

Gain on Sale of Land 150,000

Land ($350,000 - $200,000) 150,000



To eliminate the $150,000 gain reported by Silex Company and to reduce the land balance from the $350,000 recorded on the books of Procter to its $200,000 cost to the affiliated group.

Chapter 7-9

E7-4 B(2). Prepare the workpaper entries for the year ended December 31, 2009.

Cost Method and Partial Equity Method

Beg. Retained Earnings – Procter (90%) 135,000

Noncontrolling Interest (10%) 15,000

Land 150,000



Complete Equity Method

Investment in Silex Company (90%) 135,000


Land 150,000

Upstream Sale

Chapter 7-10

E7-4 Summary Points



1. Proctor (parent) continues to report the land on their statements at the intercompany selling price of $350,000. However, in the consolidated balance sheet, the land is reported at its cost to the affiliated group of $200,000.

2. If the intercompany seller had been the parent (downstream sale), the entire $150,000 would go to the controlling interest, resulting in a $150,000 debit to the beginning retained earnings of the parent company.

Chapter 7-11

E7-6 P Company owns 90% of the outstanding common stock of S Company. On January 1, 2008, S Company sold land to P Company for $600,000. S Company originally purchased the land for $400,000.

On January 1, 2009, P Company sold the land purchased from S Company to a company outside the affiliated group for $700,000.

Required:

A. Calculate the amount of gain on the sale of the land that is recognized on the books of P Company in 2009.



Sales to Outsiders

Chapter 7-12

Selling price to third party $ 700,000Cost of land to P Company 600,000Gain recognized by P Company $ 100,000

E7-6 A. Calculate the gain on the sale of the land that is recognized on the books of P Company in 2009.



B. Calculate the gain that should be recognized in the consolidated statements in 2009.

Selling price to third party $ 700,000Cost of land to affiliate group 400,000Gain recognized in consolidation $ 300,000

Chapter 7-13

E7-6 C. Prepare the workpaper entries for the year ended December 31, 2009.

Cost Method and Partial Equity Method

Beg. Retained Earnings – Procter (90%) 180,000


Gain on Sale of Land 200,000 *




Investment in Silex Company (90%) 180,000


Gain on Sale of Land 200,000 *

* Gain recognized in consolidation less gain recognized by P Company ($300,000 - $100,000 = $200,000).

Chapter 7-14

A firm may sell property or equipment to an affiliate for a price that differs from its book value.

From the view of the consolidated entity, the intercompany gain (loss) is considered to be realized from the use of the property or equipment in the generation of revenue. The use is measured by depreciation adjustments.

Intercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyProperty(Machinery, Equipment, and Buildings)(Machinery, Equipment, and Buildings)


Realization through Usage

LO 4 Intercompany gain realized through usage.LO 4 Intercompany gain realized through usage.

Chapter 7-15

When there have been intercompany sales of depreciable property, workpaper entries are necessary:

To report only those gains or losses that result from the sale of depreciable property to outside parties.

To present property in the consolidated balance sheet at its cost to the affiliated group.

To present accumulated depreciation in the consolidated balance sheet based on the cost to the affiliated group.

To present depreciation expense in the consolidated income statement based on the cost to the affiliated group.



LO 2 Financial reporting objectives— depreciable property.LO 2 Financial reporting objectives— depreciable property.

Chapter 7-16

A firm may sell property or equipment to an affiliate for a price that differs from its book value.

From the view of the consolidated entity, the intercompany gain (loss) is considered to be realized from the use of the property or equipment in the generation of revenue.



Workpaper Elimination Entries

LO 2 Financial reporting objectives— depreciable property.LO 2 Financial reporting objectives— depreciable property.

Chapter 7-17

P7-1 (Cost or Partial Equity) Powell Company owns 80% of the outstanding common stock of Sullivan Company. On June 30, 2008, Sullivan Company sold equipment to Powell Company for $500,000. The equipment cost Sullivan Company $780,000 and had accumulated depreciation of $400,000 on the date of the sale. The management of Powell Company estimated that the equipment had a remaining useful life of four years from June 30, 2008. In 2009, Powell Company reported $300,000 and Sullivan Company reported $200,000 in net income from their independent operations (including sales to affiliates but excluding dividend or equity income from subsidiary).

Intercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyPropertyIntercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyProperty

LO 6 Subsidiary vs. parent as the seller.LO 6 Subsidiary vs. parent as the seller.

Upstream Sale

Chapter 7-18

Powell Company

Equipment 500,000Cash 500,000

Sullivan Company

Cash 500,000Accumulated Depreciation 400,000

Equipment 780,000Gain on Sale of Equipment 120,000

P7-1 Entries on the books of Powell and Sullivan to record the intercompany sale are:



Chapter 7-19

Equipment 280,000

Gain on Sale of Equipment 120,000

Accumulated Depreciation 400,000

To eliminate the intercompany gain and restore equipment to its original cost to the consolidated entity.

Intercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyPropertyIntercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyPropertyP7-1 A. Prepare the workpaper entries necessary because of the sale of equipment for the year ended December 31, 2008.

Accumulated Carrying DepreciationCost Depreciation Value Life Expense

Original Cost 780,000$ 400,000$ 380,000$ 4 yr 95,000$

Selling Price 500,000 500,000 4 yr 125,000

Diff erence 280,000$ 400,000$ (120,000)$ (30,000)$


2008

Chapter 7-20

Accumulated Depreciation - Equipment 15,000

Depreciation Expense ($30,000/2) 15,000

To adjust depreciation expense to the correct amount to the consolidated entity, thus realizing a portion of the gain through usage.

Intercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyPropertyIntercompany Sales of Depreciable Intercompany Sales of Depreciable PropertyPropertyP7-1 A. Prepare the workpaper entries necessary because of the sale of equipment for the year ended December 31, 2008.


Original Cost 780,000$ 400,000$ 380,000$ 4 yr 95,000$

Selling Price 500,000 500,000 4 yr 125,000

Diff erence 280,000$ 400,000$ (120,000)$ (30,000)$


2008

Chapter 7-21

P7-1 A. Prepare the workpaper entries necessary because of the sale of equipment for the year ended December 31, 2009.


Original Cost 780,000$ 400,000$ 380,000$ 4 yr 95,000$

Selling Price 500,000 500,000 4 yr 125,000

Diff erence 280,000$ 400,000$ (120,000)$ (30,000)$

Equipment (to original cost) 280,000

Beg. Retained Earnings - Powell ($120,000 x80%)96,000

Noncontrolling Interest ($120,000 x 20%) 24,000


To eliminate prior period intercompany gain and restore equipment to its original cost to the consolidated entity.


LO 7 Computing the noncontrolling interest.LO 7 Computing the noncontrolling interest.

2009

Chapter 7-22

P7-1 A. Prepare the workpaper entries necessary because of the sale of equipment for the year ended December 31, 2009.


Original Cost 780,000$ 400,000$ 380,000$ 4 yr 95,000$

Selling Price 500,000 500,000 4 yr 125,000

Diff erence 280,000$ 400,000$ (120,000)$ (30,000)$



Beg. Retained Earnings – Powell ($15,000 x 80%) 12,000


To adjust depreciation for the current and prior year on equipment sold to affiliate.



2009

Chapter 7-23

P7-1 (variation) For the Compete Equity Method, the 2009 workpaper entries would have changed as follows:

Equipment (to original cost) 280,000

Investment in Sullivan ($120,000 x80%) 96,000







Investment in Sullivan ($15,000 x 80%) 12,000


Chapter 7-24

P7-1 (variation) If this had been a Downstream sale, the 2009 entries would have changed as follows:

Cost or Partial Equity

Noncontrolling interest of 20% would be included in Beginning Retained Earnings of Powell Company.




Noncontrolling interest of 20% would be included in Investment in Sullivan.

There is no differentiation between Controlling interest and Noncontrolling interest with Downstream

Intercompany Sales.

Chapter 7-25

P7-6 (Cost Method) Pitts Company owns 80% of the common stock of Shannon Company. The stock was purchased for $960,000 on January 1, 2006, when Shannon Company’s retained earnings were $675,000. On January 1, 2008, Shannon Company sold fixed assets to Pitts Company for $960,000; Shannon Company had purchased these assets for $1,350,000 on January 1, 1998, at which time their estimated useful life was 25 years. The estimated remaining useful life to Pitts Company on 1/1/08 is 10 years. Both companies employ the straight-line method of depreciation.

Required: A. Prepare a consolidated statements workpaper for the year ended December 31, 2009.


LO 6 Workpaper entries-upstream sales.LO 6 Workpaper entries-upstream sales.

Year Subsequent to Intercompany SaleUpstream Sale

Chapter 7-26

ConsolidatedIncome Statement Pitts Shannon Debit Credit NCI BalancesSales 1,950,000$ 1,350,000$ 3,300,000$ Dividend income 60,000 60,000 -

Total revenue 2,010,000 1,350,000 3,300,000 Cost of goods sold 1,350,000 900,000 2,250,000 Other expenses 225,000 150,000 15,000 360,000

Total cost and expense 1,575,000 1,050,000 2,610,000 Net income 435,000 300,000 690,000 Noncontrolling interest 63,000 (63,000) Net income 435,000$ 300,000$ 60,000$ 15,000$ 63,000$ 627,000$

Retained Earnings StatementRetained earnings, 1/1

Pitts 1,215,000 120,000 290,400 1,397,400 12,000

Shannon 1,038,000 1,038,000 - Net income 435,000 300,000 60,000 15,000 63,000 627,000 Dividends declared (150,000) (75,000) 60,000 (15,000) (150,000) Retained earnings, 12/31 1,500,000$ 1,263,000$ 1,218,000$ 377,400$ 48,000$ 1,874,400$

EliminationsP7-6 (Cost Method)

(4)

(3

)

(1)

(2)

(5)

(4

)

NCI in Consolidated Income = 20% x ($300,000 + $15,000) = $63,000



(3)

Chapter 7-27

ConsolidatedBalance Sheet Pitts Shannon Debit Credit NCI BalancesInventory 498,000$ 225,000$ 723,000$ Investment in S 960,000 290,400 1,250,400 - Fixed assets 2,168,100 2,625,000 390,000 5,183,100 Accum. Depreciation (900,000) (612,000) 30,000 540,000 (2,022,000)

Total assets 2,726,100$ 2,238,000$ 3,884,100$ -

Liabilities 465,600$ 450,000$ 915,600$ Common stock 760,500 525,000 525,000 760,500 Retained earnings 1,500,000 1,263,000 1,218,000 377,400 48,000 1,874,400 NCI in net assets 30,000 312,600 285,600 -

3,000 333,600 333,600

Total liab. & equity 2,726,100$ 2,238,000$ 2,483,400$ 2,483,400$ 3,884,100$

Eliminations

(2)

(3)

(5)

(5)

(2)



(1

)

(5

)(2)

(3)

P7-6 (Cost Method)

Chapter 7-28

Acquisition date retained earnings - Shannon$ 675,000Retained earnings 1/1/09 - Shannon 1,038,000Increase 363,000Ownership percentage 80%

$ 290,400

P7-6 Prepare the worksheet entries for Dec. 31, 2009.



Investment in Shannon Company 290,400

Retained Earnings – Pitts290,400

To establish reciprocity/convert to equity

1.

Chapter 7-29



2. Plant and Equipment 390,000

Retained Earnings – Pitts ($150,000 x 80%) 120,000


Accumulated Depreciation 540,000To reduce controlling and noncontrolling interests for their shares of unrealized intercompany profit at beg. of year, to restore fixed assets to its book value to the selling affiliate on the date of the intercompany sale


Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$


Chapter 7-30




3. Accumulated Depreciation 30,000

Other Expenses (Depreciation Expense) 15,000

Retained Earnings – Pitts ($15,000 x 80%) 12,000


To reverse amount of excess depreciation recorded during year and to recognize an equivalent amount of intercompany profit as realized


Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$

Chapter 7-31

Dividend Income 60,000

Dividends Declared60,000

Beg. Retained Earnings - Shannon1,038,000

Common Stock - Shannon 525,000

Investment in Shannon1,250,400 Noncontrolling Interest

312,600

To eliminate intercompany dividends

To eliminate investment account and create NCI account

4.

5.




Chapter 7-32

P7-12 (Partial Equity Method) Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1, 2006, when Stone Company’s retained earnings were $675,000. On January 1, 2008, Stone Company sold fixed assets to Prather Company for $960,000; Stone Company had purchased these assets for $1,350,000 on January 1, 1998, at which time their estimated useful life was 25 years. The estimated remaining useful life to Prather Company on 1/1/08 is 10 years. Both companies employ the straight-line method of depreciation.




Year Subsequent to Intercompany SaleUpstream Sale

Chapter 7-33

ConsolidatedIncome Statement Prather Stone Debit Credit NCI BalancesSales 1,950,000$ 1,350,000$ 3,300,000$ Equity in Sub. income 240,000 240,000 -




Pitts 1,505,400 120,000 12,000 1,397,400 Shannon 1,038,000 1,038,000 -

Net income 615,000 300,000 240,000 15,000 63,000 627,000 Dividends declared (150,000) (75,000) 60,000 (15,000) (150,000) Retained earnings, 12/31 1,970,400$ 1,263,000$ 1,398,000$ 87,000$ 48,000$ 1,874,400$

Eliminations

P7-12 (Partial Equity Method)

(1)

(3

)

(3)

(2)(4)




(1)

Chapter 7-34

ConsolidatedBalance Sheet Prather Stone Debit Credit NCI BalancesInventory 498,000$ 225,000$ 723,000$ Investment in Stone 1,430,400 1,250,400 -

180,000 Fixed assets 2,168,100 2,625,000 390,000 5,183,100 Accum. Depreciation (900,000) (612,000) 30,000 540,000 (2,022,000)

Total assets 3,196,500$ 2,238,000$ 3,884,100$ -


3,000 333,600 333,600


Eliminations

(1)(2

)

(4)

(3)

(2)



(4

)

(4)

P7-12 (Partial Equity Method)

(3)

(2)

Chapter 7-35




Equity In Subsidiary Income 240,000

Dividends Declared ($75,000 x 80%)60,000

Investment in Stone Company180,000

To reverse the effect of parent company entries during

the year for subsidiary dividends and income

1.

Chapter 7-36




Retained Earnings – Prather ($150,000 x 80%) 120,000


Accumulated Depreciation 540,000To reduce controlling and noncontrolling interests for their shares of unrealized intercompany profit at beg. of year, to restore fixed assets to its book value to the selling affiliate on the date of the intercompany sale


Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$


Chapter 7-37



3. Accumulated Depreciation 30,000


Retained Earnings – Prather ($15,000 x 80%) 12,000




Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$


Chapter 7-38

Beg. Retained Earnings - Stone 1,038,000

Common Stock - Stone 525,000

Investment in Stone1,250,400 Noncontrolling Interest

312,600To eliminate investment account and create NCI account

4.



* (($1,263,000 - $675,000) x 80%) - $180,000 = $290,400 + $960,000 = $1,250,400

** [$240,000 + ($1,038,000 - $675,000) x 20%] = $312,600

*

**


Chapter 7-39

P7-16 (Complete Equity Method) Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1, 2006, when Stone Company’s retained earnings were $675,000. On January 1, 2008, Stone Company sold fixed assets to Prather Company for $960,000; Stone Company had purchased these assets for $1,350,000 on January 1, 1998, at which time their estimated useful life was 25 years. The estimated remaining useful life to Prather Company on 1/1/08 is 10 years. Both companies employ the straight-line method of depreciation.



LO 6 Upstream sales- complete equity method.LO 6 Upstream sales- complete equity method.

Upstream SaleYear Subsequent to Intercompany Sale

Chapter 7-40

ConsolidatedIncome Statement Panther Stone Debit Credit NCI BalancesSales 1,950,000$ 1,350,000$ 3,300,000$ Equity in Stone income 252,000 252,000 -




Panther 1,397,400 1,397,400 Stone 1,038,000 1,038,000 -

Net income 627,000 300,000 252,000 15,000 63,000 627,000 Dividends declared (150,000) (75,000) 60,000 (15,000) (150,000) Retained earnings, 12/31 1,874,400$ 1,263,000$ 1,290,000$ 75,000$ 48,000$ 1,874,400$

Eliminations

P7-16 (Complete Equity Method)

(1)

(3

)

(1)

(5)




Chapter 7-41

ConsolidatedBalance Sheet Panther Stone Debit Credit NCI BalancesInventory 498,000$ 225,000$ 723,000$ Investment in S 1,334,400 120,000 192,000 -

12,000 1,250,400

Fixed assets 2,168,100 2,625,000 390,000 5,183,100 Accum. Depreciation (900,000) (612,000) 30,000 540,000 (2,022,000)

Total assets 3,100,500$ 2,238,000$ 3,884,100$ -


3,000 333,600 333,600


Eliminations

(4)

(5)

(4)


(2

)

(1

)

(3)

P7-16 (Complete Equity Method)


(3)

(2

)(3

)

(2

)

(2)

Chapter 7-42



Equity in Subsidiary Income 252,000

Dividends Declared ($75,000 x 80%)60,000

Investment in Stone Company192,000

To reverse the effect of parent company entries during

the year for subsidiary dividends and income

1.


Chapter 7-43




Investment in Stone ($150,000 x 80%) 120,000


Accumulated Depreciation 540,000To reduce controlling and noncontrolling interests for their shares of unrealized intercompany profit at beg. of year, to restore the carrying value of equipment to its book value on the date of the intercompany sale


Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$


Chapter 7-44



3.


Original Cost 1,350,000$ 540,000$ 810,000$ 10 yr 81,000$

Selling Price 960,000 960,000 10 yr 96,000

Diff erence 390,000$ 540,000$ (150,000)$ (15,000)$


Accumulated Depreciation 30,000


Investment in Stone Company ($15,000 x 80%) 12,000



Chapter 7-45




Beg. Retained Earnings - Stone 1,038,000

Common Stock - Stone 525,000

Investment in Stone 1,250,400 Noncontrolling Interest

312,600To eliminate investment account and create NCI account

4.

* (($1,263,000 - $675,000) x 8)%) - $180,000 = $290,400 + $960,000 = $1,250,400

** [$240,000 + ($1,038,000 - $675,000) x 20%] = $312,600

*

**

Chapter 7-46

Under the Complete Equity Method:

Consolidated net income equals the parent company’s recorded income.

Consolidated retained earnings equals the parent company’s recorded retained earnings.

Calculation And Allocation Of Calculation And Allocation Of ConsolidatedConsolidatedNet Income; Consolidated Retained Net Income; Consolidated Retained Earnings:Earnings:Complete Equity MethodComplete Equity Method

Calculation And Allocation Of Calculation And Allocation Of ConsolidatedConsolidatedNet Income; Consolidated Retained Net Income; Consolidated Retained Earnings:Earnings:Complete Equity MethodComplete Equity Method

LO 8 Consolidated net income – complete equity method.LO 8 Consolidated net income – complete equity method.

Chapter 7-47

Income and expenses relating to interest, fees, and rents should be reported in consolidation only when they arise from transactions with parties outside the affiliated group.

Intercompany Interest, Rents, and Intercompany Interest, Rents, and Service FeesService FeesIntercompany Interest, Rents, and Intercompany Interest, Rents, and Service FeesService Fees

LO 10 Intercompany interest, rents, service fees.LO 10 Intercompany interest, rents, service fees.

Workpaper entry to eliminate intercompany interest:

Interest Income XXXInterest Expense XXX

Workpaper entry to eliminate intercompany payables and receivables:

Notes Payable XXXNotes Receivable XXX

Interest Payable XXXInterest Receivable XXX

Chapter 7-48



Workpaper entry to eliminate intercompany rent:

Rent Income XXXRent Expense XXX

When one affiliate charges fees to another, the form of the eliminating entry is determined by how the transaction is recorded by the affiliates.

Intercompany Service Fees

Chapter 7-49

Eliminating entries relating to intercompany transactions depend on how these transactions are recorded on the books of the affiliates. In all cases the financial reporting objectives are:

To include in revenue only the amounts that result from transactions with parties outside the affiliated group.

To present property in the consolidated balance sheet at its cost to the affiliated group.

To present accumulated depreciation in the consolidated balance sheet based on the cost to the affiliated group.

To present depreciation expense in the consolidated income statement based on the cost to the affiliated group.



Chapter 7-50

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chapter 7-1. chapter 7-2 elimination of unrealized gains or losses on intercompany sales of property...

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