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Sample Quiz for Chapter 6 - Indiana University of...

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Indiana University of Pennsylvania Department of Accounting ACCT 401/501: Advanced Accounting Dr. Rahman Sample Quiz for Chapter 6 Part I. Circle the best choice. Use the following information for questions 1 and 2. In 2018, Parrot Company sold land to its subsidiary, Tree Corporation, for $12,000. It had a book value of $10,000. In the next year, Tree sold the land for $18,000 to an unaffiliated firm. 1. Which of the following is correct? a. No consolidation working paper entry was necessary in 2018. b. A consolidation working paper entry was required only if the subsidiary was less than 100% owned in 2018. c. A consolidation working paper entry is required each year until the land is sold outside the related parties. d. A consolidated working paper entry was required only if the land was held for resale in 2018. 2. The 2018 unrealized gain 3. On January 1, 2018, Eagle Corporation sold equipment with a book value of $40,000 and a 20-year remaining useful life to its wholly-owned subsidiary, Rabbit Corporation, for $60,000. Both Eagle and Rabbit use the straight-line depreciation method, assuming no salvage value. On December 31, 2018, the separate company financial statements held the following balances associated with the equipment: Eagle Rabbit Gain on sale of equipment $ 20,000 Depreciation expense $ 3,000 Equipment 60,000 Accumulated depreciation 3,000 A working paper entry to consolidate the financial statements of Eagle and Rabbit on December 31, 2018 included a
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