Question 1 On January 2, 2013, Plymouth Company sold a piece of equipment to its 80% subsidiary Shakopee Corporation. The equipment originally cost Plymouth $50,000 and had accumulated depreciation of $20,000. Plymouth sold it to Shakopee for $35,000. It has a remaining useful life of 5 years. Plymouth uses the cost method to record its investment in Shakopee.

A. Calculate the unrealized gain from the intercompany sale of equipment

B. Prepare the actual journal entries recorded by Plymouth and Shakopee in 2013.

C. Prepare the elimination entries related to this intercompany sale for 12-31-2013.

Question 2 Using the information from Exercise 1 above, assume that Shakopee sells the equipment for $20,000 to a third party after it has owned the equipment for three years. Assume the asset has been depreciated for the year.

A. Calculate S's gain and the consolidated gain or loss from the sale

B. Prepare the appropriate eliminating entry as of December 31, 2015.