Which of the following statements is true regarding an intra-entity transfer of land?
a. A loss is always recognized but a gain is deferred in a consolidated income statement.
b. A loss and a gain are deferred until the land is sold to an outside party.
c. A loss and a gain are always recognized in a consolidated income statement.
d. A gain is always recognized but a loss is deferred in a consolidated income statement.
e. Recognition of a gain or loss is deferred by adjusting stockholders equity through comprehensive income.
Business combination occurs when an entity obtains control over another company. If this is the case, intercompany transactions must be eliminated .
Answer and Explanation:
The anser is Option B
A loss and a gain are deferred until the land is sold to an outside party when there is an intra-entity transfer of land.
Since when companies entered into business combination, they are prohibited from making transactions with each other.
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from Finance 305: Risk ManagementChapter 3 / Lesson 3