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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Subsea Co will sell machinery (which was carried in its books at cost of $120,000 less
What is the consolidated
(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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