On Jan 2, 2016, a subsidiary sells to its parent equipment that had cost $25,000. The selling price was $21,000 and accumulated depreciation on that date was $9,000. The subsidiary and the parent both estimate that the equipment has a remaining useful life of 8 years.

Required:

a. Compute the difference between the annual depreciation expense when the subsidiary owned the equipment and depreciation expense recorded by the parent.

b. Compute the gain on sale recorded by the subsidiary.

c. Prepare the consolidation entries for 2016 related to the equipment sale.

d. Prepare the consolidation entries for 2018 related to the equipment sale.