P7-35 Intercompany Sale of Land and Depreciable Asset LO 7-3, 7-6 Putt Corporation acquired 70 percent of Slice Company's voting common stock on January 1, 20X3, for $158,900. Slice reported common stock outstanding of $100,000 and retained earnings of $85,000. The fair value of the noncontrolling interest was $68,100 at the date of acquisition. Buildings and equipment held by Slice had a fair value $25,000 higher than book value. The remainder of the differential was assigned to a copyright held by Slice. Buildings and equipment had a 10-year remaining life and the copyright had a 5-year life at the date of acquisition. Trial balances for Putt and Slice on December 31, 20X5, are as follows: Putt Corporation Slice Company Debit Credit Debit Credit Cash $ 15,850 Accounts Receivable 65,000 $ 58,000 70,000 Interest & Other Receivables 30,000 Inventory 150,000 10,000 180,000 Land 80,000 60,000 Buildings & Equipment 315,000 240,000 Bond Discount 15,000 Investment in Slice Company 157,630 Cost of Goods Sold 375,000 110,000 Interest Expense Depreciation Expense Other Expense Dividends Declared Accumulated Depreciation-Buildings and Equipment Accounts Payable Other Payables 25,000 10,000 24,000 33,000 28,000 17,000 30,000 5,000 $ 120,000 $ 60,000 61,000 28,000 30,000 20,000 Bonds Payable 250,000 300,000 Common Stock Additional Paid-in Capital Retained Earnings Sales Other Income 150,000 100,000 30,000 165,240 100,000 450,000 190,400 28,250 Gain on Sale of Equipment Income from Slice Company Total 9,600 $1,295,480 10,990 $1,295,480 $808,000 $808,000 Putt sold land it had purchased for $21,000 to Slice on September 20, 20X4, for $32,000. Slice plans to use the land for future plant expansion. On January 1, 20X5, Slice sold equipment to Putt for $91,600. Slice purchased the equipment on January 1, 20X3, for $100,000 and depreciated it on a 10-year basis, including an estimated residual value of $10,000. The residual value and estimated economic life of the equipment remained unchanged as a result of the transfer, and both companies use straight-line depreciation. Assume Putt uses the fully adjusted equity method.