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Company P holds 70 percent of the voting shares of Company S. During 20X8, Company...

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Accounting

Company P holds 70 percent of the voting shares of Company S. During 20X8, Company S sold land with a book value of $125,000 to Company P for $150,000. Company P continues to hold the land at the end of the year. The companies file separate tax returns and are subject to a 40 percent tax rate. Assume that Company P uses the fully adjusted equity method in accounting for its investment in Company S.
Based on the information given, which consolidating entry relating to the intercorporate sale of land is to be entered in the consolidation worksheet prepared at the end of 20X8?
Event Account tittle Debit Credit
A) Deferred Tax Asset 10,000
A) Income Tax Expense 10,000
B) Deferred Tax Asset 25,000
B) Income Tax Expense 25,000
C) Deferred Tax Asset 25,000
C) Land 25,000
D) No consolidating entry is required.
A) Option A
B) Option B
C) Option C
D) Option D

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