question archive Phobos Company holds 80 percent of Deimos Company's voting shares
Phobos Company holds 80 percent of Deimos Company's voting shares
Subject:FinancePrice:2.87 Bought7
Phobos Company holds 80 percent of Deimos Company's voting shares. During the preparation of consolidated financial statements for 20X9, the following consolidating entry was made:
| Investment in Deimos | 50,000 | |
| Land | 50,000 |
Which of the following statements is correct?
A. Phobos Company purchased land from Deimos Company during 20X9.
B. Phobos Company purchased land from Deimos Company before January 1, 20X9.
C. Deimos Company purchased land from Phobos Company during 20X9.
D. Deimos Company purchased land from Phobos Company before January 1, 20X9.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
The consolidated entry was:
Debit Investment in Deimos $50,000
Credit Land $50,000
This consolidated entry is made by Phobos company and crediting the Land account means Land is sold by Phobos Company and purchased by Deimos company. Further this entry is made during 20X9, therefore the purchase of land is made before the year.
Hence the correct option is Option D - Deimos Company purchased land from Phobos Company before January 1, 20X9.
