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Company P sells equipment to Company S at its current market price of $80,000. The original purchase price was $100,000, and P has already recognized $50,000 in accumulated depreciation. The sale is made on January 1, 2021, when the equipment has a remaining life of 5 years.

Company S records a purchase of equipment at the price of $80,000, though from a consolidated point of view, $50,000 is the appropriate figure. S will depreciation the equipment over 5 years, expensing $16,000 per year. However, from a consolidated view, only $10,000 per year ($50,000 over 5 years) should be recognized.

Company P records a gain of $30,000 on the sale of equipment, which should not be recognized by the consolidated entity because nothing has been earned. The gain is closed to Ps Retained Earnings account at the end of 2013.

When consolidating P and S, the gain of $30,000 needs to eliminated, and the depreciation needs to be adjusted. The following consolidating entries are necessary for 2021 (the year of transfer):

Gain on sale of equipment 30,000

Equipment 20,000

Accumulated depreciation 50,000

(Equipment and accumulated depreciation are adjusted back to their book values as of the date of transfer.)

Accumulated depreciation 6,000

Depreciation expense 6,000

a) For the years following the transfer:

b) Downstream Transfer and Parent Uses the Equity Method:

c) Effect on Noncontrolling Interest?