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ACCT 4866
Nov 4, 2023
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1. Under the fully adjusted equity method, which of the following is true of the parent company's journal entry to defer the gain on an intercompany fixed asset sale? (select all that apply) Income from Subsidiary account is debited. Investment in Subsidiary account is credited. 2. Intercompany transactions are sometimes undertaken to transfer profit from __ high-tax______ to ______ low-tax__ jurisdictions. 3. The return on equity for the parent's separate-entity statements under the __ equity method______ is equal to the consolidated return on equity for the shareholders of parent. 4. Assume that a parent company has sold goods to its subsidiary. A portion of the inventory sold by the parent company to the subsidiary is resold in the next financial period to unaffiliated customers. Which of the following is the consolidation entry to recognize previously deferred profits? Debit Investment in Subsidiary; Credit Cost of Goods Sold 5. Under the equity method, in recording its share of the subsidiary company's income, the parent company debits______ Investment in the Subsidiary. 6. In recognizing profits which were previously deferred, the parent's Investment in Subsidiary account is __DEBITED____. 7. Volt Electronics Corp. holds a 70% stake in Jolt Electrical Corp. Volt Electronics held land costing $100,000, which it has purchased from a non-affiliate. It transferred this land to Jolt Electrical Corp. for $120,000 on January 1, 20X1. Jolt Electronics held the land in its books until December 31, 20X1. On February 2, 20X2, Jolt Electronics sold the land to a non-affiliate for $130,000. Calculate the intercompany profit or loss that must be eliminated in the consolidation process as of December 31, 20X1. Intercompany profit on sale of land = Sale value of land - Book value of land = $120,000 - $100,000 = $20,000.
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