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 $123,000, equipment that originally cost $144,000. 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 Mark 0.00 out of 1.00
Annual depreciation expense-parent	$Answer Mark 0.00 out of 1.00

b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.

$Answer

Mark 0.00 out of 1.00

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 Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	Equipment	Answer Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 1.00 out of 1.00	Answer Mark 0.00 out of 1.00
[Idepr]	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 1.00 out of 1.00	Answer Mark 0.00 out of 1.00

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 Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 1.00 out of 1.00	Answer Mark 0.00 out of 1.00
[Idepr]	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 0.00 out of 1.00	Answer Mark 1.00 out of 1.00
	AnswerEquipmentAccumulated depreciation-EquipmentInvestment in subsidiaryDepreciation expenseGain on sale of equipment	Answer Mark 1.00 out of 1.00	Answer