Parent Ltd. pays $ 550,000 cash for 70% of the outstanding voting shares of Sub Ltd. on January 1, 20X5. The following information was available:

During 20X5, Sub Ltd. earned $ 180,000 and paid no dividends. The inventory on hand at January 1, 20X5, was sold during 20X5. The equipment will be depreciated over 10 years straight-line; the building will be depreciated over 20 years straight-line. The liabilities were paid during 20X5. Parent Ltd. uses the cost method of accounting for its investment.

Required
Prepare the consolidation- related eliminations required at December 31, 20X5, based on the above information under the entitymethod.

Transcribed Image Text:

Sub Ltd. Statement of Financial Position January 1, 20x5 Carrying value 40,000 40,000 120,000 300,000 50,000 550,000 10,000 250,000 290,000 $550,000 Cash Inventory Equipment, net Building, net Land Fair value $40,000 30,000 100,000 360,000 160,000 14,000 Liabilities Common shares Retained eamings