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Chapter 06 - Intercompany Transfers of Services and Noncurrent Assets Chapter 06 Intercompany Transfers of Services and Noncurrent Assets Multiple Choice Questions 1. Blue Company owns 70 percent of Black Company's outstanding common stock. On December 31, 2008, Black sold equipment to Blue at a price in excess of Black's carrying amount, but less than its original cost. On a consolidated balance sheet at December 31, 2008, the carrying amount of the equipment should be reported at: A. Blue's original cost. B. Black's original cost. C. Blue's original cost less Black's recorded gain. D. Blue's original cost less 70 percent of Black's recorded gain. 2. A parent and its 80 percent owned subsidiary have made several intercompany sales of noncurrent assets during the past two years. The amount of income assigned to the noncontrolling interest for the second year should include the noncontrolling interest's share of gains: A. unrealized in the second year from upstream sales made in the second year. B. realized in the second year from downstream sales made in both years. C. realized in the second year from upstream sales made in both years. D. both realized and unrealized from upstream sales made in the second year. 3. A wholly owned subsidiary sold land to its parent during the year at a gain. The parent continues to hold the land at the end of the year. The amount to be reported as consolidated net income for the year should equal: A. the parent's separate operating income, plus the subsidiary's net income. B. the parent's separate operating income, plus the subsidiary's net income, minus the intercompany gain. C. the parent's separate operating income, plus the subsidiary's net income, plus the intercompany gain. D. the parent's net income, plus the subsidiary's net income, minus the intercompany gain. 6-1 Chapter 06 - Intercompany Transfers of Services and Noncurrent Assets Sky Corporation owns 75 percent of Earth Company's stock. On July 1, 2008, Sky sold a building to Earth for $33,000. Sky had purchased this building on January 1, 2006, for $36,000. The building's original eight-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment's residual value is considered negligible. 4. Based on the information provided, in the preparation of the 2008 consolidated financial statements, building will be _____ in the eliminating entries. A. debited for $33,000 B. debited for $36,000 C. credited for $36,000 D. debited for $3,000 5. Based on the information provided, the gain on sale of the building eliminated in the consolidated financial statements for 2008 is: A. $8,250. B. $10,500. C. $6,000. D. $11,250.... View Full Document

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