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Question - Company A sells equipment to company B which is outside the normal course of business

Company A owns 30% of Company B shares.

Selling price was $ 50,000 which is its approximate fair value.

Carrying value of equipment in Company A books is $30,000.

Tax rate is 30% for all parties.

Required -

a) Prepare Day 1 journal entry for both Companies.

b) How would the answer change if Company A and B were related under common control? Prepare the initial journal entries.

c) How would the answer change if Company A owned 60% of Company B? Prepare the initial journal entries.

Reference no: EM132948069

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