**Sale of Machinery: Accounting Entry Example**On January 1, 20X5, Spring Company purchased a machine with an expected economic life of ten years. On January 1, 20X8, Spring sold the machine to Peterson Corporation and recorded the following entry:| **Account** | **Debit** | **Credit** ||------------------------------|-----------|------------|| Cash | 350,000 | || Accumulated Depreciation | 120,000 | || Machine | | 400,000 || Gain on Sale of Equipment | | 70,000 |**Explanation:**- **Cash**: Recorded as a debit entry of $350,000, reflecting the cash received from the sale.- **Accumulated Depreciation**: Recorded as a debit entry of $120,000, reducing the carrying amount of the machine.- **Machine**: Recorded as a credit entry of $400,000, representing the original cost of the machine.- **Gain on Sale of Equipment**: Recorded as a credit entry of $70,000, showing the profit from the sale.Peterson Corporation holds 80 percent of Spring's voting shares. For 20X8, Spring reported a net income of $200,000, while Peterson reported an income from its operations of $380,000. There is no change in the estimated economic life of the equipment due to the intercorporate transfer.**Question:**Based on the preceding information, what is the income assigned to the noncontrolling interest in the 20X8 consolidated income statement?- ☐ $40,000.- ☐ $28,000.- ☐ $32,000.- ☐ $140,000.

Name: **Sale of Machinery: Accounting Entry Example**On January 1, 20X5, Sp
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Description: **Sale of Machinery: Accounting Entry Example**On January 1, 20X5, Spring Company purchased a machine with an expected economic life of ten years. On January 1, 20X8, Spring sold the machine to Peterson Corporation and recorded the following entry:|

Merger and acquisition:Merger & acquisition refers to the financial strategy where one company acquires the majority of voting rights or stocks of another company. The company that holds the stocks of another company is known as a parent company, and, whose stocks are held by the parent company is called a subsidiary company.According to the question given, the parent company is Peterson Corporation, and, the subsidiary company is Spring Company. Workings:1) Computation of the share of Peterson Corporation as a parent company = 80% 2) Computation of the share of non-controlling interest = 20%When transactions between the parent company and subsidiary company, unrealized profit resulting from intra-group transactions that are included in the carrying amount of the assets need to be eliminated in full.The statement of the determination of the income assigned to the non-controlling interest:ParticularsAmount $Net income reported by Spring Company for the year 20x8200000Add: Gain on the sale of asset70000Total net income (a)270000The share of non-controlling interest (b)20%Total income reported for non-controlling interest (a * b)54000Less: Elimination of the unrealized profit (70000 * 20%)(14000)Net income reported for non-controlling interest 40000Hence option 1 is correct.Final answer,Thus, the income assigned to the non-controlling interest in the year 20x8 is $ 40000.Thus, the correct option is (1) or $ 40000.

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On January 1, 20X5, Spring Company purchased a machine with an expected economic life of ten years. On January 1, 20X8, Spring sold the machine to Peterson Corporation and recorded the following entry: Cash Accumulated Depreciation Machine Gain on Sale of Equipment Account O $40,000. O $28,000. O $32,000. O $140,000. Debit 350,000 120,000 Credit Peterson Corporation holds 80 percent of Spring's voting shares. Spring reported net income of $200,000, and Peterson reported income from its own operations of $380,000 for 20X8. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer. Based on the preceding information, income assigned to the noncontrolling interest in the 20X8 consolidated income statement will be: 400,000 70,000

On January 1, 20X5, Spring Company purchased a machine with an expected economic life of ten years. On January 1, 20X8, Spring sold the machine to Peterson Corporation and recorded the following entry: Cash Accumulated Depreciation Machine Gain on Sale of Equipment Account O $40,000. O $28,000. O $32,000. O $140,000. Debit 350,000 120,000 Credit Peterson Corporation holds 80 percent of Spring's voting shares. Spring reported net income of $200,000, and Peterson reported income from its own operations of $380,000 for 20X8. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer. Based on the preceding information, income assigned to the noncontrolling interest in the 20X8 consolidated income statement will be: 400,000 70,000

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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