Dithers Inc. acquired all of the common stock of Bumstead Corp. on January 1, 2018. During 2018, Bumstead sold land to Dithers at a gain. No consolidation entry for the sale of the land was made at the end of 2018. What errors will this omission cause in the consolidated financial statements?
What will be an ideal response?
| Consolidation Entry for 2018 | ||
| Gain on Sale of Land | XXX | |
| Land | XXX | |
? | ||
| ? | ||
| This omission causes both the amounts for Land and Gain on Sale of Land to be overstated in the consolidated financial statements, and ultimately, Total Assets and Ending Retained Earnings may be overstated as well. Also, the correction for gain may be allocated to the noncontrolling interest share of subsidiary earnings and the noncontrolling interest balance on the consolidated balance sheet. | ||
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