ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Question
Chapter 7, Problem 7.12E
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 1
The consolidated entry to remove the effect of the intercompany sale as of December 31 20X3.
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 2
The consolidated entry to remove the effect of the intercompany sale as of December 31 20X4.
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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…
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…
Chapter 7 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - Prob. 7.3QCh. 7 - Prob. 7.4QCh. 7 - Prob. 7.5QCh. 7 - Prob. 7.6QCh. 7 - Prob. 7.7QCh. 7 - Prob. 7.8QCh. 7 - Prob. 7.9QCh. 7 - Prob. 7.10Q
Ch. 7 - Prob. 7.11QCh. 7 - Prob. 7.12QCh. 7 - Prob. 7.13QCh. 7 - Prob. 7.14QCh. 7 - Prob. 7.15QCh. 7 - Prob. 7.16QCh. 7 - Prob. 7.17QCh. 7 - Prob. 7.18AQCh. 7 - Prob. 7.1CCh. 7 - Prob. 7.2CCh. 7 - Prob. 7.3CCh. 7 - Prob. 7.4CCh. 7 - Prob. 7.5CCh. 7 - Prob. 7.1.1ECh. 7 - Prob. 7.1.2ECh. 7 - Prob. 7.1.3ECh. 7 - Prob. 7.1.4ECh. 7 - Prob. 7.1.5ECh. 7 - Prob. 7.2.1ECh. 7 - Prob. 7.2.2ECh. 7 - Prob. 7.2.3ECh. 7 - Prob. 7.2.4ECh. 7 - Prob. 7.2.5ECh. 7 - Prob. 7.2.6ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Transfer of Depreciable Asset at Year-End Pitcher...Ch. 7 - Prob. 7.9ECh. 7 - Sale of Equipment to Subsidiary in Current Period...Ch. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24PCh. 7 - Prob. 7.25PCh. 7 - Prob. 7.26PCh. 7 - Prob. 7.27PCh. 7 - Prob. 7.28.1PCh. 7 - Prob. 7.28.2PCh. 7 - Prob. 7.28.3PCh. 7 - Prob. 7.28.4PCh. 7 - Prob. 7.29PCh. 7 - Prob. 7.30PCh. 7 - Prob. 7.31PCh. 7 - Prob. 7.32PCh. 7 - Prob. 7.33PCh. 7 - Prob. 7.34PCh. 7 - Prob. 7.35PCh. 7 - Prob. 7.37PCh. 7 - Prob. 7.38PCh. 7 - Prob. 7.41AP
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