Assume on January 1, 2017, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $180,000. The subsidiary originally purchased the equipment on January 1, 2013, and depreciated the equipment assuming a 12-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 8 years. The parent uses the equity method to account for its Equity Investment. a. Compute the annual pre-consolidation depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale). Annual depreciation expense-subsidiary $ 15.000 ✓ Annual depreciation expense-parent $ 16.500 ✓ b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2017. $ 12,000 ✓ c. Prepare the required [I] consolidation journal entry in 2017 (assume a full year of depreciation). Consolidation Worksheet Description [Igain] Gain on sale of equipment Equipment Accumulated depreciation-Equipment ✓ [Idep] Accumulated depreciation-Equipment : ✓ Depreciation expense + ✔ ÷ Consolidation Worksheet Description [Igain] Investment in subsidiary Equipment Accumulated depreciation-Equipment d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2019. Prepare the required [I] consolidation journal entries during the holding period. Debit 12.000 ✓ 48.000 ✓ 0✓ 1,500 ✓ ✓ ✓ Debit Credit 0x 48,000 ✓ 0✓ 0✔ 0✓ 60,000 ✓ 0✓ 1,500 ✓ Credit 0✔ 7,200 x
Assume on January 1, 2017, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $180,000. The subsidiary originally purchased the equipment on January 1, 2013, and depreciated the equipment assuming a 12-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 8 years. The parent uses the equity method to account for its Equity Investment. a. Compute the annual pre-consolidation depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale). Annual depreciation expense-subsidiary $ 15.000 ✓ Annual depreciation expense-parent $ 16.500 ✓ b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2017. $ 12,000 ✓ c. Prepare the required [I] consolidation journal entry in 2017 (assume a full year of depreciation). Consolidation Worksheet Description [Igain] Gain on sale of equipment Equipment Accumulated depreciation-Equipment ✓ [Idep] Accumulated depreciation-Equipment : ✓ Depreciation expense + ✔ ÷ Consolidation Worksheet Description [Igain] Investment in subsidiary Equipment Accumulated depreciation-Equipment d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2019. Prepare the required [I] consolidation journal entries during the holding period. Debit 12.000 ✓ 48.000 ✓ 0✓ 1,500 ✓ ✓ ✓ Debit Credit 0x 48,000 ✓ 0✓ 0✔ 0✓ 60,000 ✓ 0✓ 1,500 ✓ Credit 0✔ 7,200 x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I'm only missing two parts on section D. Thank you.
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![Assume on January 1, 2017, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $180,000. The subsidiary originally purchased the equipment on January 1, 2013, and depreciated
the equipment assuming a 12-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 8 years. The parent uses
the equity method to account for its Equity Investment.
a. Compute the annual pre-consolidation depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale).
Annual depreciation expense-subsidiary $
15.000 ✓
Annual depreciation expense-parent $ 16.500 ✓
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2017.
$ 12,000
c. Prepare the required [I] consolidation journal entry in 2017 (assume a full year of depreciation).
Consolidation Worksheet
Description
[Igain] Gain on sale of equipment
Equipment
Accumulated depreciation-Equipment
[Idep] Accumulated depreciation-Equipment
Depreciation expense
+
Description
[Igain] Investment in subsidiary
Equipment
✓
+ ✓
+ ✓
Consolidation Worksheet
Accumulated depreciation-Equipment
[Idep] Accumulated depreciation-Equipment
Depreciation expense
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2019. Prepare the required [1] consolidation journal entries during the holding period.
✓
Debit
12,000 ✓
48,000 ✓
0✓
1,500 ✓
;
+ ✓
Debit
0x
Credit
48,000✔
0✓
1.500 ✓
0✔
60,000 ✓
1,500 ✓
Credit
0
0✓
7,200 x
1,500 ✓](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa473baa3-9bd5-4357-84f5-5054f258c753%2F741cd0c8-dd9c-46f6-88b4-ebc0d8ed9b75%2Fe6tify8_processed.png&w=3840&q=75)
Transcribed Image Text:Assume on January 1, 2017, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $180,000. The subsidiary originally purchased the equipment on January 1, 2013, and depreciated
the equipment assuming a 12-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 8 years. The parent uses
the equity method to account for its Equity Investment.
a. Compute the annual pre-consolidation depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale).
Annual depreciation expense-subsidiary $
15.000 ✓
Annual depreciation expense-parent $ 16.500 ✓
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2017.
$ 12,000
c. Prepare the required [I] consolidation journal entry in 2017 (assume a full year of depreciation).
Consolidation Worksheet
Description
[Igain] Gain on sale of equipment
Equipment
Accumulated depreciation-Equipment
[Idep] Accumulated depreciation-Equipment
Depreciation expense
+
Description
[Igain] Investment in subsidiary
Equipment
✓
+ ✓
+ ✓
Consolidation Worksheet
Accumulated depreciation-Equipment
[Idep] Accumulated depreciation-Equipment
Depreciation expense
d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2019. Prepare the required [1] consolidation journal entries during the holding period.
✓
Debit
12,000 ✓
48,000 ✓
0✓
1,500 ✓
;
+ ✓
Debit
0x
Credit
48,000✔
0✓
1.500 ✓
0✔
60,000 ✓
1,500 ✓
Credit
0
0✓
7,200 x
1,500 ✓
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