Intercompany Profit Transactions Nondepreciable assets Summer I 2009

Intercompany Profit Transactions Nondepreciable assets Summer I 2009

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Accounting 401 Intercompany Profit Transactions Non-depreciable Asset Transfers Summer I 2009 A. In order to totally understand the accounting for intercompany transfers of land, it is necessary to have a solid background and understanding of how to account for land on companies’ separate books. B. The selling affiliate records a realized gain (or loss) on its records. At the same time, the purchasing affiliate records the acquisition of the land at its cost to them. That cost to the purchasing affiliate is an inflated price according to the consolidated entity records. C. Also, from the perspective of the consolidated entity, both the purchasing affiliate’s land account and the selling affiliate’s retained earnings (if the sale is upstream) or investment account (if the sale is downstream) are overstated (assuming a gain on the sale) or understated (assuming a loss on the sale) for the period(s) following the intercompany transfer. This overstatement or
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Intercompany Profit Transactions Nondepreciable assets Summer I 2009

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