Preparing the [I] consolidation journal entries for sale of depreciable assets - Equity method Assume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $126,000, equipment that originally cost $148,000. The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the full equity method to account for its Equity Investment. a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale). Annual depreciation expense-subsidiary $ 14,800 Annual depreciation expense-parent $ 21,000 b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011. $ 37,200 c. Prepare the required [I] consolidation journal entry in 2011 (assume a full year of depreciation). Consolidation Worksheet Description [Igain] Gain on sale of equipment Debit 37,200 Credit Equipment Accumulated depreciation-Equipment 31,000 x 0 68,200 x [Idepr] Accumulated depreciation-Equipment 68,200 x Depreciation expense 0 68,200 x d. Now assume that you are preparing the year-end consolidation journal entries for the year ending December 31, 2013. Prepare the required [I] consolidation journal entries during the holding period. Consolidation Worksheet Description [Igain] Investment in subsidiary Equipment Accumulated depreciation-Equipment [Idepr] Accumulated depreciation-Equipment Depreciation expense Debit Credit 37,200 x 0 x 0 31,000 x 6,200 x 21,000 x 0 21,000 x