Preparing the [I] consolidation entries for sale of depreciable assetsCost method Assume on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $100,000, equipment that originally cost $120,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The subsidiary has adopted the parents depreciation policy and depreciates the equipment over the remaining useful life of 8 years. The parent uses the cost method of pre-consolidation investment bookkeeping.

a. Compute the pre-consolidation annual depreciation expense for the subsidiary (post-intercompany sale) and the parent (pre-intercompany sale).

Parent depreciation expense	Answer
Subsidiary depreciation expense	Answer