Department of Accounting
ACCT 401/501: Advanced Accounting
Sample Quiz for Chapter 6
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
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.
The 2018 unrealized gain
a. was deferred until 2019.
b. was eliminated from consolidated net income by a working paper entry that
credited land $2,000.
c. made consolidated net income $2,000 less than it would have been had the sale not
d. made consolidated net income $2,000 greater than it would have been had the sale
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:
Gain on sale of equipment
A working paper entry to consolidate the financial statements of Eagle and Rabbit on
December 31, 2018 included a
a. debit to gain on sale of equipment for $19,000.
b. credit to gain on sale of equipment for $20,000.