Janis Company contracted with its 80%-owned subsidiary, Essuman Equipment Company, for the construction of two stamping machines.

Question:

Janis Company contracted with its 80%-owned subsidiary, Essuman Equipment Company, for the construction of two stamping machines. The first machine was completed and put into operation on July 1, 2011. It cost Essuman $60,000 and has a 5-year estimated life with no salvage value. The contract price was $75,000. The machine is being depreciated on a straight-line basis. The second machine, with an estimated total cost of $90,000 and a contract price of $120,000, was 80% complete on December 31, 2011. To date, costs on the second contract total $72,000. By the statement date, Janis had completely paid for the first machine and still owed $3,000 of the $60,000 billed to date on the second machine. Essuman uses the completed-contract method to account for its long-term construction contracts.

1. Prepare the necessary eliminations for the consolidated worksheet on December 31, 2011.

2. What are the effects of these contracts on the income distribution schedules?

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... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...