1). Preparing the [I] consolidation entries for sale of land

Assume during 2018 a wholly owned subsidiary sells land that originally cost $468,000 to its parent for a sale price of $520,000. The parent holds the land until it sells the land to an unaffiliated company on December 31, 2022. The parent uses the equity method of pre-consolidation bookkeeping.

a. Prepare the required [I] consolidation entry in 2018.

b. Prepare the required [I] consolidation entry required at the end of each year 2019 through 2021.

c. Assume the parent re-sells the land outside of the consolidated group for $546,000 on December 31, 2022. Prepare the journal entry made by the parent to record the sale and the required [I] consolidation entry for 2022.

d. What will be the amount of gain reported in the consolidated income statement in 2022?

e. For this question only, assume the parent used the cost method of pre-consolidation investment bookkeeping. How would the preceding [I] entries differ?

2). Preparing the [I] consolidation entries for sale of land Assume on June 15, 2015, a parent company sells land that originally cost $75,000 to its wholly owned subsidiary for a sale price of $97,500. The subsidiary holds the land until it sells it to an unaffiliated com- pany on November 12, 2022. The parent uses the equity method to account for its Equity Investment.

a. Prepare the required [I] consolidation entry in 2015.

b. Prepare the required [I] consolidation entry required at the end of each year 2016 through 2021.

c. Assume the subsidiary resells the land outside of the consolidated group for $127,500 on November 12, 2022. Prepare the journal entry made by the subsidiary to record the sale and the required [I] consolidation entry for 2022.

d. What will be the amount of gain reported in the consolidated income statement in 2022?

e. For this question only, assume the parent used the cost method of pre-consolidation investment bookkeeping. How would the preceding [I] entries differ?

3). Preparing the [I] consolidation entries for sale of depreciable assetsEquity method Assume on January 1, 2020, a wholly owned subsidiary sells to its parent, for a sale price of $88,000, equipment that originally cost $120,000. The subsidiary originally purchased the equipment on Janu- ary 1, 2016, and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The parent has adopted the subsidiarys depreciation policy and depreciates the equipment over the remaining useful life of 8 years. The parent uses the equity method to account for its Equity Investment.

a. Compute the annual pre-consolidation depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale).

b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2020.

c. Prepare the required [I] consolidation entry in 2020. (Assume a full year of depreciation.)

d. Now assume you are preparing the year-end consolidation entries for the year ending December 31, 2022. Prepare the required [I] consolidation entries during the holding period. e. How long must we continue to make the [I] consolidation entries?

4). Preparing the [I] consolidation entries for sale of depreciable assetsEquity method Assume on January 1, 2019, 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, 2015, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The subsidiary has adopted the parents depreciation policy and depreciates the equipment over the re- maining 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 (post- intercompany sale) and the parent (pre-intercompany sale).

b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2019.

c. Prepare the required [I] consolidation entry in 2019. (Assume a full year of depreciation.)

d. Prepare the required [I] consolidation entry in 2022 (assuming the subsidiary is still holding the equipment). e. How long must we continue to make the [I] consolidation entries?