*Downstream Depreciable Assets transaction

On January 1, 2021, Penn Company purchased 80% of the outstanding common shares of Senn Company. Penn Co. had owned the equipment for two years and used a five-year straight line depreciation with no resifual 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.

21. Prepare eliminating (consolidation) entries for intercompany transactions on December 31, 2021. (1) Elimination of excess depreciartion because of the sales of equipment Account Debit Credit Accumulated Depreciation Account Debit Credit Gain on sale 22. Prepare Penn Co's fully adjusted equity method journal entries to eliminate intercompany transaction (1) Deferral of gain on sale of equipment Account Credit Debit (2) Reversal of the deferred gain (Depreciation difference) Account Debit Credit 22. Answer: What is the consolidated net income? 23 Answer: What is the net income attributable to NCI (NCI in NI)? 24. Answer: What is the Net Income attributable to Controlling Interest (Controlling Interest Net Income)? 25. Based on the information above, please complete the following worksheet. Consolidation Entries DR CR Penn Co. Senn Co. Consolidated Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other expenses Gain on sale of fixed assets Income from Senn Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income 23,700 (12,000) (3,000) (4,000) 300 15,000 (7,000) (2,000) (3,000) 5,000 3,000 0 o 5,000 3,000 0 0 Balance sheet Equipment Accumulated Depreciation 12,000 (4,000) 8,000 (3,000)