Subsea Co will sell machinery (which was carried in its books at cost of $120,000 less accumulated depreciation $80,000) to Paron Co for $100,000. The machinery had a remaining useful life of 3 years on the date of the intercompany sale. What is the consolidated journal entry as at Dec 20x0 for: (a) If Paron Co acquires all the shares of Subsea Co (b) if Paron Co acquires 70% of the shares of Subsea Co

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Subsea Co will sell machinery (which was carried in its books at cost of $120,000 less accumulated depreciation $80,000) to Paron Co for $100,000. The machinery had a remaining useful life of 3 years on the date of the intercompany sale.

What is the consolidated journal entry as at Dec 20x0 for:

(a) If Paron Co acquires all the shares of Subsea Co

(b) if Paron Co acquires 70% of the shares of Subsea Co

Expert Solution
Step 1: Define intercompany transaction

Intercompany transaction refers to the business transaction happens between the associated companies (parent and subsdiary). If the sale is made from subsidiary to parent, it is known as upstream transaction. However, if the sale is made from parent to subsidiary, it is known as downstream transaction.

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