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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Preparing the [I] 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 (post-intercompany sale).
Annual depreciation expense-subsidiary $
Annual depreciation expense-parent $
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$0
c. Prepare the required [I] consolidation journal entry in 2011 (assume a full year of depreciation).
Consolidation Worksheet
Description
[Igain]
[Idepr]
Equipment
[Idepr]
Description
[Igain] Investment in subsidiary
♦
◆
0
0
◆
◆
◆
Debit
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2013. Prepare the required [I] consolidation journal entries during the holding period.
Consolidation Worksheet
0
0
Debit
0
0
0
0
0
0
0
Credit
0
0
0
0
0
0
Credit
ܘ ܘ ܘ ܘ ܘ](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3cadaab7-0242-405d-ab75-d1a15c225b30%2F29582996-19d9-4a19-b768-d46b9e26ff45%2Fbb4w7ln_processed.png&w=3840&q=75)
Transcribed Image Text:Preparing the [I] 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 (post-intercompany sale).
Annual depreciation expense-subsidiary $
Annual depreciation expense-parent $
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$0
c. Prepare the required [I] consolidation journal entry in 2011 (assume a full year of depreciation).
Consolidation Worksheet
Description
[Igain]
[Idepr]
Equipment
[Idepr]
Description
[Igain] Investment in subsidiary
♦
◆
0
0
◆
◆
◆
Debit
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2013. Prepare the required [I] consolidation journal entries during the holding period.
Consolidation Worksheet
0
0
Debit
0
0
0
0
0
0
0
Credit
0
0
0
0
0
0
Credit
ܘ ܘ ܘ ܘ ܘ
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