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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

FINANCIAL ACCOUNTING
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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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
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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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
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
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Follow-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
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
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