a. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale). Subsidiary-depreciation $ 0 Parent-depreciation $ 0 b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016. $0 c. Prepare the required [1] consolidation entry in 2016 (assume a full year of depreciation). Description Debit Credit [gain] Equipment [idep] [gain] Equipment ÷ ÷ ÷ [Idep] d. Prepare the required [I] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). Description Debit Credit ooo # 0 0 ÷ 0 0 0 0 ooooo 0 0 0 0 0 0 0 0 ooooo
a. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale). Subsidiary-depreciation $ 0 Parent-depreciation $ 0 b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016. $0 c. Prepare the required [1] consolidation entry in 2016 (assume a full year of depreciation). Description Debit Credit [gain] Equipment [idep] [gain] Equipment ÷ ÷ ÷ [Idep] d. Prepare the required [I] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). Description Debit Credit ooo # 0 0 ÷ 0 0 0 0 ooooo 0 0 0 0 0 0 0 0 ooooo
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Preparing the [I] consolidation entries for sale of depreciable assets-Equity method
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $243,000, equipment that originally cost $276,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-
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. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary - depreciation $ 0
Parent depreciation $ 0
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$0
c. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation).
Description
Debit
Credit
[lgain] Equipment
[Idep]
[lgain] Equipment
+
◆
→
[Idep]
◆
d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment).
Description
Debit
Credit
◆
0
0
0
0
0
→
ooooo
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3cadaab7-0242-405d-ab75-d1a15c225b30%2F99f46274-3b56-4cfd-9855-88427dc0fab2%2Fdmo6kgi_processed.png&w=3840&q=75)
Transcribed Image Text:Preparing the [I] consolidation entries for sale of depreciable assets-Equity method
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $243,000, equipment that originally cost $276,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-
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. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary - depreciation $ 0
Parent depreciation $ 0
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$0
c. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation).
Description
Debit
Credit
[lgain] Equipment
[Idep]
[lgain] Equipment
+
◆
→
[Idep]
◆
d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment).
Description
Debit
Credit
◆
0
0
0
0
0
→
ooooo
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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Follow-up Question
![Preparing the consolidation journal entries for sale of depreciable assets-Equity method
Assume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $156,000
The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line
with no salvage value. The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6
years. The parent uses the full equity method to account for its Equity Investment
a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (poss-intercompany sale)
Annual depreciation expense-subsidiary $156,000
Annual depreciation expense-parent $ 122,000x
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$ 62,400 x
c. Prepare the required consolidation journal entry in 2011 (assume a full year of depreciation)
Consolidation Worksheet
Description
gain Gain on sale of equipment
Equipment
depr] Gain one of equipment
Depreciation expense
Dain investment in
Equipment
Description
✓
depr) Accumulated depreciation Equipme
Depreciation exper
M
x
M
x
Debit
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2013. Prepare the required [1]
consolidation journal entries during the holding period.
Consolidation Worksheet
L
28,400
24,000
0
ON
04
D
Credit
0x
0.
0✔
Ox
0
DU
6,400
Credit
DV
DX
DV](https://content.bartleby.com/qna-images/question/3cadaab7-0242-405d-ab75-d1a15c225b30/1cfd9c27-c7e1-4059-9479-745232d6f051/w2qwlwj_processed.jpeg)
Transcribed Image Text:Preparing the consolidation journal entries for sale of depreciable assets-Equity method
Assume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $156,000
The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line
with no salvage value. The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6
years. The parent uses the full equity method to account for its Equity Investment
a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (poss-intercompany sale)
Annual depreciation expense-subsidiary $156,000
Annual depreciation expense-parent $ 122,000x
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$ 62,400 x
c. Prepare the required consolidation journal entry in 2011 (assume a full year of depreciation)
Consolidation Worksheet
Description
gain Gain on sale of equipment
Equipment
depr] Gain one of equipment
Depreciation expense
Dain investment in
Equipment
Description
✓
depr) Accumulated depreciation Equipme
Depreciation exper
M
x
M
x
Debit
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2013. Prepare the required [1]
consolidation journal entries during the holding period.
Consolidation Worksheet
L
28,400
24,000
0
ON
04
D
Credit
0x
0.
0✔
Ox
0
DU
6,400
Credit
DV
DX
DV
Solution
by Bartleby ExpertFollow-up Question
![Preparing the consolidation entries for sale of depreciable assets-Equity method
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $243,000, equipment that originally cost $276,000.
The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-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. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary-depreciation $ 40,500
Parent-depreciations 27,600
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$ 77,400
c. Prepare the required consolidation entry in 2016 (assume a full year of depreciation)
Debit
Description
Grade
Dan Equipmen
Equipment
Gain on sale
110,400
depl Accumulated depreciation
Depreciation expens
12,900
d. Prepare the required [] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment
Description
Deb
Credit
Dear Equipmen
Equity investment
Accumulated depreciation
depl Accumulated depreciation
x
M
M
23,000✔
77400✔
✓
✓
0✔
12,900✔
23,000✔
129,000
0✔
12,900
0✔
162,000
DV
12,000](https://content.bartleby.com/qna-images/question/3cadaab7-0242-405d-ab75-d1a15c225b30/3341ccf5-d318-45ba-868b-a4e28d45f253/qjpz5x_processed.jpeg)
Transcribed Image Text:Preparing the consolidation entries for sale of depreciable assets-Equity method
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $243,000, equipment that originally cost $276,000.
The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-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. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary-depreciation $ 40,500
Parent-depreciations 27,600
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$ 77,400
c. Prepare the required consolidation entry in 2016 (assume a full year of depreciation)
Debit
Description
Grade
Dan Equipmen
Equipment
Gain on sale
110,400
depl Accumulated depreciation
Depreciation expens
12,900
d. Prepare the required [] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment
Description
Deb
Credit
Dear Equipmen
Equity investment
Accumulated depreciation
depl Accumulated depreciation
x
M
M
23,000✔
77400✔
✓
✓
0✔
12,900✔
23,000✔
129,000
0✔
12,900
0✔
162,000
DV
12,000
Solution
by Bartleby ExpertKnowledge Booster
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