file attached
Chapter 5 Assignment 2 Pierce Manufacturing owns all of the outstanding voting common stock of Sylvia Company, as acquired several years ago when the book values and fair values of Sylvia's net assets were equal. In 2014, Pierce set out to re-structure the company, and in doing so, re-aligned the manufacturing processes to streamline the use of automated equipment. As a result, they set out to move certain equipment around between the facilities owned by both Pierce and Sylvia, and ultimately agreed on the following transfers and exchange prices. It was agreed that the exchange price would be paid in cash on January 1, 2015, the date the equipment was transferred. Straight-line depreciation is used and the different pieces of equipment have no salvage value. Life Equipment Equipment Original Remain Transfer moved from moved to cost (years) 1 Pierce Sylvia 100,000 10 2 Sylvia Pierce 60,000 10 3 Pierce Sylvia 120,000 8 4 Sylvia Pierce 24,000 5 5 Pierce Sylvia 35,000 5 6 Sylvia Pierce 90,000 5 Accum. deprec.(at transfer) 52,500 20,000 72,000 10,800 12,500 52,500 Exchange price 50,000 40,000 40,000 15,000 25,000 37,500 REQUIRED: 1. Prepare the consolidation worksheet entries that would be required as a result of the above transactions for 2015. 2. Prepare the consolidation worksheet entries that would be required as a result of the above transactions for 2016. Question 1 Entries to be made in 2015 In the Books of Pierce : Transfe r 1 3 5 TOTAL Actual Cost 100000 120000 35000 255000 Accu. Dep. 52500 72000 12500 137000 Consolidated Entries 1. Sylvia Accumulated Dep. Profit & Loss A/c To Equipments A/c (Being equipments sold to Sylvia) 2. 3. Dr. Dr. Dr. Cash/Bank A/c To Sylvia (Being Amount received from Sylvia) Exchange Price 40000 15000 37500 92500 Acc. Depreciation To Profit & Loss A/c (Being Depreciation Charged) Exchange Price 50000 40000 25000 115000 1,15,000 1,37,000 3,000 2,55,000 Equipments A/c Dr. To Sylvia A/c (Being equipment received from Sylvia) Transfer 2 4 6 TOTAL 4. WDV 47500 48000 22500 118000 92,500 92,500 Dr. Life 10 5 5 Dr. 22,500 22,500 Depreciation (Yearly) 4000 3000 7500 14500 14,500 14,500 Profit/Loss 2500 -8000 2500 -3000 In the Books of Sylvia : Transfe r 2 4 6 TOTAL Actual Cost 60000 24000 90000 174000 Accu. Dep. 20000 10800 52500 83300 WDV 40000 13200 37500 90700 Exchange Price 40000 15000 37500 92500 Consolidated Entries 1. Equipments A/c Dr. To Pierce A/c (Being equipment received from Pierce) 2. Pierce Accumulated Dep. To Equipments A/c To Profit & Loss (Being equipments sold to Pierce) Dr. Dr. Pierce A/c To Cash/Bank A/c (Being Amount paid to Pierce) Dr. 3. Transfer 1 3 5 TOTAL 4. Exchange Price 50000 40000 25000 115000 Acc. Depreciation To Profit & Loss A/c (Being Depreciation Charged) 1,15,000 1,15,000 92,500 83,300 1,74,000 1,800 22,500 22,500 Life 10 8 5 Dr. Depreciation (Yearly) 5000 5000 5000 15000 15,000 15,000 Profit/Loss 0 1800 0 1800 Question 2 Entries to be made in 2016 In the Books of Pierce : Transfer Exchange Price 2 40000 4 15000 6 37500 TOTAL 92500 1. Acc. Depreciation To Profit & Loss A/c (Being Depreciation Charged) In the Books of Sylvia : Transfer Exchange Price 1 50000 3 40000 5 25000 TOTAL 115000 1. Acc. Depreciation To Profit & Loss A/c (Being Depreciation Charged) Life 10 5 5 Dr. Life 10 8 5 Dr. Depreciation (Yearly) 4000 3000 7500 14500 14,500 14,500 Depreciation (Yearly) 5000 5000 5000 15000 15,000 15,000
