Question
Preparing the [I] consolidation journal entries for sale of depreciable assets - Equity method Assume that on January 1, 2011, a wholly owned subsidiary sells
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 | $Answer
|
| Annual depreciation expense-parent | $Answer
|
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$Answer
c. Prepare the required [I] consolidation journal entry in 2011 (assume a full year of depreciation).
| Consolidation Worksheet | |||
|---|---|---|---|
| Description | Debit | Credit | |
| [Igain] | AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
|
| Equipment | Answer
| Answer
| |
| AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
| |
| [Idepr] | AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
|
| AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
| |
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 | Debit | Credit | |
| [Igain] | Investment in subsidiary | Answer
| Answer
|
| AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
| |
| AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
| |
| [Idepr] | AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
|
| AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment
| Answer
| Answer
| |
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