Preparing the (I) consolidation entries for sale of depreciable assets-equity method. Assume on 1/1/2016, a parent sells to its wholly owned subsidiary, for a sale price of 162,000, equipment that originally cost 184,000. The 

parent originally purchased the equipmt on 1/1/2012, and depreciated the equipmt assuming a 10-year useful life (straight-line w/no SV). The subsidiary has adopted the parents dep policy and depreciates the equipmt over the 

remaining useful life of 6 years. The parent uses the equity method to account for its Equity Investment. 

 

a. compute the annual pre-consolidation dep exp for the subsidiary (post-intercompany sale) and the parent (pre-intercompany sale).

b. compute the pre-consolidation Gain on Sale recognized by the parent during 2016.

c. prepare the required (I) consolidation entry in 2016 (assume a full year of depreciation).

d. prepare the required (I) consolidation entry in 2019 (assuming the subsidiary is still holding the equipment).

e. how long must we continue to make the (I) consolidation entries?