8. Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $135,000, equipment that originally cost $138,000. The parent originally purchased the equipment on January 1, 2010 and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The subsidiary has adopted the parent's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the equity method to account for its Equity Investment. a. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation). b. Prepare the required [1] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). a. Gain on Sale $3,000

8. Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $135,000, equipment that originally cost $138,000. The parent originally purchased the equipment on January 1, 2010 and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The subsidiary has adopted the parent's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the equity method to account for its Equity Investment. a. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation). b. Prepare the required [1] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). a. Gain on Sale $3,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

8. Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price
of $135,000, equipment that originally cost $138,000. The parent originally purchased the
equipment on January 1, 2010 and depreciated the equipment assuming a 12-year useful life
(straight-line with no salvage value). The subsidiary has adopted the parent’s depreciation policy
and depreciates the equipment over the remaining useful life of 6 years. The parent uses the
equity method to account for its Equity Investment.
a. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation).
b. Prepare the required [1] consolidation entry in 2019 (assuming the subsidiary is still holding
the equipment).
a. Gain on Sale
$3,000
Equipment
Accumulated Depreciation
Accumulated Depreciation
Depreciation Expense

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