*Downstream Depreciable Assets transaction
On January 1, 2021, Penn Company purchased 80% of the outstanding common shares of Senn Company.
On January 2 2021, Penn Company sold equipment with an original cost of $2,000 and a carrying value of $1,200 to Senn Co for $1,500.
Penn Co. had owned the equipment for two years and used a five-year straight line depreciation with no residual value.
Senn Co. is using straight-line depreciation over three years with no residual value.
Senn Co. reported net income of $3,000 and Penn reported separate operating income (excluding income from Senn Co.) of $5,000 during 2021.
Q1.	Prepare eliminating (consolidation) entries for intercompany transactions on December 31, 2021.
	(1) Elimination of excess depreciation because of the sales of equipment
	Account	Debit	Credit
	Accumulated Depreciation
	Account	Debit	Credit
	Gain on sale
Q2.	Prepare Penn Co's fully adjusted equity method journal entries to eliminate intercompany transaction
	(1)   Deferral of gain on sale of equipment
	Account	Debit	Credit
	(2) Reversal of the deferred gain (Depreciation difference)
	Account	Debit	Credit
Q2.	What is the consolidated net income?
Answer:
Q3.	What is the net income attributable to NCI (NCI in NI)?
Answer:
Q4.	What is the Net Income attributable to Controlling Interest (Controlling Interest Net Income)?
Answer:
Q5.	Based on the information above, please complete the following worksheet.
			Penn Co.		Senn Co.		Consolidation Entries
					DR		CR		Consolidated
	Income Statement
	Sales		23,700		15,000
	Less: COGS		(12,000)		(7,000)
	Less: Depreciation Expense		(3,000)		(2,000)
	Less: Other expenses		(4,000)		(3,000)
	Gain on sale of fixed assets		300
	Income from Senn Co.
	Consolidated Net Income		5,000		3,000		0		0
	NCI in Net Income
	Controlling Interest in Net Income		5,000		3,000		0		0
	Balance sheet
	Equipment		12,000		8,000
	Accumulated Depreciation		(4,000)		(3,000)

 

ABCDEFGHKM*Downstream Depreciable Assets transactionOn January 1, 2021, Penn Company purchased 80% of the outstanding common shares of Senn Company.3 On January 2 2021, Penn Company sold equipment with an original cost of $2,000 and a carrying value of $1,200 to Senn Co for $1,500.Penn Co. had owned the equipment for two years and used a five-year straight line depreciation with no residual value.Senn Co. is using straight-line depreciation over three years with no residual value.Senn Co. reported net income of $3,000 and Penn reported separate operating income (excluding income from Senn Co.) of $5,000 during 2021.78 Q1Prepare eliminating (consolidation) entries for intercompany transactions on December 31, 2021.9(1) Elimination of excess depreciation because of the sales of equipment10AccountDebiCredit11Accumulated Depreciation121314AccountDebitCredit15Gain on sale16171819 Q2.Prepare Penn Co's fully adjusted equity method journal entries to eliminate intercompany transaction20(1) Deferral of gain on sale of equipment21AccountDebitCredit222324(2) Reversal of the deferred gain (Depreciation difference)25AccountDebitCredit26272829 Q2.What is the consolidated net income?30 Answer:313233 Q3.What is the net income attributable to NCI (NCI in NI)?34 Answer: A 30 |Answer:31 32 33 |Q3. 34 |Answer:35 36 | Q4. 37 |[Answer:38 39 Q5. 40 a1 42 43444546474849505132533455 3637 What is the net income attributable to NCI (NCl in NI)? What is the Net Income attributable to Controlling Interest (Controlling Interest Net Income)? Based on the information above, please complete the following worksheet. Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other expenses Gain on sale of fixed assetsIncome from Senn Co.Consolidated Met Income MNCI in Net Income Controlling Interest in Net Income Balance sheetEquipmentAccumulated Depreciation Penn Co. 23,700(12,000)(3,000)(4,000)300 5,000 5,000 12,000(4,000) Consolidation EntriesSenn Co. DR CR Consolidated 15,000(7,000)(2,000)(3,000)