Question
Upstream Intercompany Building Transactions Shiek Shoes sold an administrative building to its parent, Pearl Industries, on January 1, 2018, for $8,000,000. At the time of
Upstream Intercompany Building Transactions
Shiek Shoes sold an administrative building to its parent, Pearl Industries, on January 1, 2018, for $8,000,000. At the time of sale, the building was carried on Shiek's books at original cost of $10,000,000, with $8,500,000 of accumulated depreciation. At the date of sale, the building had a remaining life of 20 years, and straight-line depreciation is appropriate. It is now December 31, 2020, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Pearl still owns the building.
Required
a. Prepare the required eliminating entries for this intercompany building sale for the December 31, 2020, consolidation working paper.
Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).
Description
Debit Credit Answer
Answer Answer Accumulated depreciation
Answer Answer Answer
Answer Answer To eliminate the beginning-of-year unconfirmed gain.
Answer
Answer Answer Answer
Answer Answer To adjust depreciation expense.
Answer
Answer Answer Answer
Answer Answer To restate the accounts to their original acquisition cost basis.
b. What balances does Pearl report in its own trial balance for this building at December 31, 2020?
- Use negative signs with answers to indicate a Credit (Cr) balance.
- Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).
Account
Amount
Dr (Cr) Building, original cost
Answer Accumulated depreciation
Answer Depreciaiton expense
Answer
Consider these balances: building, original cost; accumulated depreciation, building; depreciation expense, building. What balances should be reported on the consolidated trial balance?
- Use negative signs with answers to indicate a Credit (Cr) balance.
- Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).
Account
Amount
Dr (Cr) Building, original cost
Answer Accumulated depreciation
Answer Depreciation expense
Answer
Show how the eliminating entries in part a adjust Pearl's book balances to the correct consolidated balances.
- Enter Debit and Credit answers in order as the journal entries appear in part a.
- Use negative signs in the "Dr (Cr)" columns to indicate a credit balance (not in the "Credit" column).
- Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).
Account
Pearl
Dr (Cr) Debit Credit Consolidated
Balances
Dr (Cr) Building, original cost
Answer Answer Answer Answer Accumulated depreciation
Answer Answer Answer Answer
Answer
Depreciation expense
Answer
Answer Answer
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Canadian Cases In Financial Accounting
Authors: Carol E. Dilworth, Joan E. D. Conrod
2nd Edition
256111405, 978-0256111408
