If a company sells a depreciable asset to its subsidiary at a profit on December 31, 20X3, what account balances must be eliminated or adjusted in preparing the consolidated income statement for 20X3? If the sale instead occurred on January 1, 20X3, what additional account will require adjustment in preparing the consolidated income statement? How are unrealized profits treated in the consolidated income statement if the intercompany sale occurred in a prior period and the transferred item is sold to a nonaffiliate in the current period? When a parent company sells land to a subsidiary at more than book value, the consolidation entries at the end of the period include a debit to the gain on the sale of land

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1. If a company sells a depreciable asset to its subsidiary at a profit on December 31, 20X3, what account balances must be eliminated or adjusted in preparing the consolidated income statement for 20X3? If the sale instead occurred on January 1, 20X3, what additional account will require adjustment in preparing the consolidated income statement?
2. How are unrealized profits treated in the consolidated income statement if the intercompany sale occurred in a prior period and the transferred item is sold to a nonaffiliate in the current period?
3. When a parent company sells land to a subsidiary at more than book value, the consolidation entries at the end of the period include a debit to the gain on the sale of land. When a parent purchases the bonds of a subsidiary from a nonaffiliate at less than book value, the consolidation entries at the end of the period contain a credit to a gain on bond retirement. Why are these two situations not handled in the same manner on the consolidation worksheet?