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Preparing the [l] consolidation entries for sale of depreciable assets-Equity method Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary,

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Preparing the [l] consolidation entries for sale of depreciable assets-Equity method Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $121,500, equipment that originally cost $138,000. 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 depreciates 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 the subsidiary (postintercompany sale) and the parent (pre-intercompany sale). Subsidiary - depreciation $ 20,250 Parent - depreciation $ 13,800 b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016. $ 38,700 0 0 0 0 0 C. Prepare the required [l] consolidation entry in 2016 (assume a full year of depreciation). Description Debit Credit [lgain] Equipment 16,500 Gain on sale 38,700 Accumulated depreciation 55,200 [Idep] Accumulated depreciation 6,450 Depreciation expense 6,450 d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). Description Debit Credit [lgain] Equipment 535,500 x 0 Gain on sale x 19,350 0 Accumulated depreciation - 0 554,850 x [ldep] Accumulated depreciation 6,450 0 Depreciation expense 6,450 0 Preparing the [l] consolidation entries for sale of depreciable assets-Equity method Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $121,500, equipment that originally cost $138,000. 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 depreciates 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 the subsidiary (postintercompany sale) and the parent (pre-intercompany sale). Subsidiary - depreciation $ 20,250 Parent - depreciation $ 13,800 b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016. $ 38,700 0 0 0 0 0 C. Prepare the required [l] consolidation entry in 2016 (assume a full year of depreciation). Description Debit Credit [lgain] Equipment 16,500 Gain on sale 38,700 Accumulated depreciation 55,200 [Idep] Accumulated depreciation 6,450 Depreciation expense 6,450 d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). Description Debit Credit [lgain] Equipment 535,500 x 0 Gain on sale x 19,350 0 Accumulated depreciation - 0 554,850 x [ldep] Accumulated depreciation 6,450 0 Depreciation expense 6,450 0

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