Question
On January 1, 20X7, Wainwrite Corporation sold to Lance Corporation equipment it had purchased for $135,000 and used for eight years. Wainwrite recorded a gain
On January 1, 20X7, Wainwrite Corporation sold to Lance Corporation equipment it had purchased for $135,000 and used for eight years. Wainwrite recorded a gain of $22,400 on the sale. The equipment has a total useful life of 15 years and is depreciated on a straight-line basis. Wainwrite holds 65 percent of Lances voting common shares. |
Required: | |
a. | Prepare the journal entry made by Wainwrite on January 1, 20X7, to record the sale of equipment. 1. Record the gain on Equipment. |
b. | Prepare the journal entries recorded by Lance during 20X7 to record the purchase of equipment and year-end depreciation expense.
1. Record purchase of equipment. 2. Record Depreciation Expense entry. |
c. | Prepare the elimination entry or entries related to the intercompany sale of equipment needed at December 31, 20X7, to prepare a full set of consolidated financial statements. |
1. Record the entry to eliminate gain on equipment and to correct asset's basis. 2. Record entry to adjust Accumulated Depreciation. |
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