On July 1, 2015, Pearl Industries sold administrative equipment with a book value of $1,200,000 to its subsidiary, Shiek Shoes, for $1,400,000. At the date of sale, the equipment had a remaining life of five years. It is being straight-line depreciated on Shiek’s books. It is now December 31, 2017, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Shiek still owns the equipment.

Required

(a) Prepare the necessary consolidation eliminating entries at December 31, 2017.

Consolidation Journal
Description	Debit	Credit
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
To eliminate unconfirmed gain on intercompany transfer of equipment.
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipment quite in net income of Shiek	Answer	Answer
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
To eliminate excess depreciation expense.

(b) It is now December 31, 2018. Prepare the required eliminating entries for this intercompany equipment transaction for the December 31, 2018, consolidation working paper.

Consolidation Journal
Description	Debit	Credit
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
To eliminate unconfirmed gain on intercompany transfer of equipment.
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
To eliminate excess depreciation expense.

(c) Now assume that Shiek sells the equipment to an outside party for $1,000,000 on January 1, 2019.

What is the consolidated gain on the sale of equipment? $Answer

What is the gain reported by Shiek? $Answer

Prepare the required eliminating entries for the December 31, 2019, consolidation working paper.

Consolidation Journal
Description	Debit	Credit
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer
AnswerInvestment in ShiekEquipment, netDepreciation expenseGain on sale of equipmentEquity in net income of Shiek	Answer	Answer