Chain Co. owned all of the voting common stock of Shannon Corp. The corporations' balance sheets dated December 31, 2017, include the following balances for land: for Chain--$416,000, and for Shannon--$256,000. On the original date of acquisition, the book value of Shannon's land was equal to its fair value. On April 4, 2018, Chain sold to Shannon a parcel of land with a book value of $65,000. The selling price was $83,000. There were no other transfers, which affected the companies' land accounts during 2017. What is the consolidated balance for land on the 2018 balance sheet

The consolidated balance for land on 2018 balance sheet = $416,00 + $256,000 = $672,000. The answer is D

Explanation:

First, the multiple choices to the question is as follows

A $654,000.

B $755,000.

C $737,000.

D $672,000.

E $690,000.

First, the Parent Company's land (Chain Co's land is = $416,000

Secondly, the Subsidiary Company's land (Shannon Corp = $256,000

It should be noted that if any gain made on the transfer of the land between the Parent Company as well as the Subsidiary company can only be recognized when the transferred piece of land is sold to a thrid party company in the future.

Based on this understanding, The consolidated balance for land on 2018 balance sheet

= $416,00 + $256,000 = $672,000

The gains on transfer $83,000-$65,000 will only be recognized in the future when the land is sold outside the consolidated firms.

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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