Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 4, Problem 8E
To determine

To prepare: Worksheet eliminations that would be made on the 2015 consolidated worksheet as a result of the real estate sale.

Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.

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Paraiso company’s accounting policy with respect to investment properties is to measure them at fair value at the end of each reporting period. One of the investment properties was measured at 12,000,000 on Dec. 31, 2015. The property had been acquired on January 1, 2015 for a total of 11,400,000, made up of 10,350,000 paid to the vendor, 450,000 paid to the local authority as a property transfer tax and 600,000 paid to professional advisers. The useful life of the property is 40 years. What is the gain to be recognized for the year ended December 31, 2015 in respect of the investment property?
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