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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
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 $129,000, equipment that originally cost $152,000. 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 $15,200 Annual depreciation expense-parent 21,500 b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011 $ 37,800 C. Prepare the required [U] consolidation journal entry in 2011 (assume a full year of depreciation) Consolidation Worksheet Description Debit Credit gain] Gain on sale of equipment 7,800 Equipment 23,000 Accumulated depreciation-Equipment 60,800 [ldepr) Accumulated depreciation-Equipment 6,300 Depreciation expense 6,300
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