2) The following intercompany transactions occurred during the year:

(1.5 Marks)

• Parent loaned $12500 to Sub. To keep things simple, assume that there is no interest revenue or interest expense associated with this loan.
• Parent made a sale to Sub for $13000 cash. The inventory had originally cost Parent $12220. Sub then sold that same inventory to an outsider for $14000.
• Parent made a sale to Sub for $15000 cash. The inventory had originally cost Parent $11280. Sub has not yet sold that same inventory to an outsider. (Dont forget equity method entry!)

Based on our conceptual discussion, what consolidation worksheet entries would you make?

3) Peter Corp. purchased a machine on Jan 1, 2011 for $ 120,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on Dec. 31, 2012, Peter corp. sold the machine to its 100 % owned subsidiary, Sonu Co. for $ 100,000. Sonu Co. estimated that the asset had a remaining useful life of five years.

What is the amount of the gain or loss recorded by Peter Corp. at the time of the fixed transfer? What balance would have existed if the transfer had not taken place?

Show the worksheet entry on Dec. 31, 2012 to eliminate the asset transfer to make adjustment to change form Actual to As If the asset hadnt been transferred.

(1.5 Marks)