RSM321H1 Chapter Notes - Chapter 7A: Deferred Tax, Historical Cost, Income Statement

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Published on 23 Mar 2016
School
UTSG
Department
Rotman Commerce
Course
RSM321H1
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gain/loss on sale
life remaining =reduction/increasedepreciation
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Document Summary

Chapter 7: (a) intercompany profits in depreciable assets. In the holdback of intercompany profit on the sale of inventory/land, the profit was eventually realized in both the separate-entity and consolidated statements. Two adjustments must be made upon consolidation: holdback the gross gain/loss on the sale of the depreciable asset, along with decreasing income tax expense. The same as if the asset was land: adjust the depreciation in the income statement to reflect the historical cost depreciation amount, along with increasing income tax expense. The adjustment each period would simply be gain / loss on sale life remaining. The equity method journal entries needed in relation to an upstream holdback of a gain on a depreciable asset: dr. investment income. Investment in sub: < to record the after-tax holdback of the gain, dr. investment in sub. : < to record the realization of a portion of the gain from reduced depreciation.

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