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 $126,000, equipment that originally cost $148,000. 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 Answer Annual depreciation expense-parent Answer   b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011. $Answer

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Chapter1: Financial Statements And Business Decisions
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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 $126,000, equipment that originally cost $148,000. 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 Answer
Annual depreciation expense-parent Answer

 

b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.

$Answer

c. Prepare the required [I] consolidation journal entry in 2011 (assume a full year of depreciation).

Consolidation Worksheet
  Description Debit Credit
[Igain] Answer Answer Answer
  Equipment Answer Answer
  Answer Answer Answer
[Idepr] Answer Answer Answer
  Answer Answer Answer

 

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
  Description Debit Credit
[Igain] Investment in subsidiary Answer Answer
  Answer Answer Answer
  Answer Answer Answer
[Idepr] Answer Answer Answer
  Answer Answer Answer
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