Fred Corporation owns 75 percent of Winner Company's voting shares, acquired on March 21, 20X5, at book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Winner Company. On January 1, 20X4, Fred paid $150,000 for equipment with a 10-year expected total economic life. The equipment was depreciated on a straight-line basis with no residual value. Winner purchased the equipment from Fred on December 31, 20X6, for $140,000. Winner sold land it had purchased for $75,000 on February 18, 20X4, to Fred for $60,000 on October 10, 20X7. Required: Prepare the elimination entries for 20X8 related to the sale of depreciable assets and land.

Correct Answer:

DRAccumulated Depreciation 5,000

CRDepreciation Expense 5,000

DRInvestment in Summit 30,000

DRBuildings and Equipment 10,000

CRAccumulated Depreciation 40,000

For building,

If we are looking at 2008, why investment 30, bldg 10 and A/d 40? Did we not record an entry in 2007? Should it not be Investment 25K, Equipment 10K, and A/D 35K? It is posted as the correct solution, but can someone explain why?