Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2011. The machine has

Question:

Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2011. The machine has an estimated 5-year life and will be straight-line depreciated with no . The machine was then leased to Sunshine Engineering Company, an 80%-owned subsidiary, under a 5-year operating lease for $15,000 per year, payable each January.
1. Record the 2011 entries for the purchase of the machine and the lease to Sunshine Engineering Company on the books of Grande Machinery Company.
2. Record the 2011 entries for the transaction on the books of Sunshine Engineering Company.
3. Provide the elimination entries that would be made on the 2011 consolidated worksheet.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...