Al Salam Company owns 80% of the outstanding stock of Shrouk Corporation, which was purchased on January 1, 2010, when Shrouk's book values were equal to its fair values. The amount paid by Al Salam included $8,000 for goodwill. On January 1, 2011, Al Salam purchased a truck for $20,000 which had no salvage value with a useful life of 8 years, depreciated on a straight-line basis. On January 1, 2016, Al Salam sold the truck to Shrouk Corporation for $9,000. The truck was estimated to have a three-year remaining life on this date and no salvage value. All affiliates use the straight-line depreciation method.

Required:

Prepare all relevant entries with respect to the truck.

1. Record the journal entries on Al Salam's books for 2016. (3 marks)

2. Record the journal entries on Shrouk's books for 2016. (3 marks)

3. Prepare the consolidation entries required for Al Salam and subsidiary for 2016 as a result of this transaction. (4 marks)