Question
Preparing the [I] consolidation entries for sale of depreciable assets-Equity method Assume on Jan. 1, 2016, a parent sells to its wholly owned subsidiary, for
Preparing the [I] consolidation entries for sale of depreciable assets-Equity method
Assume on Jan. 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 equipment on January 1, 2012 and depreciated the equipment assuming a 10 year useful life ( straight- line with no salvage value). The subsidiary has adopted the parent's depreciation policy and depreciated the equipment 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 depreciation expense for 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
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