Use the following information for questions 1-2:

Woody Corporation acquired 70% of Buzz Company's voting common stock on January 1, 20X3, for $158,900. Buzz reported common stock outstanding of $100,000 and retained earnings of $85,000. The fair value of the noncontrolling interest was 68,100 on the date of acquisition. Buildings and equipment held by Buzz had a fair value that was $25,000 higher than book value. The remainder of the differential was assigned to a copyright held by Buzz. Buildings and Equipment had a 10-year remaining life and the copyright had a 5-year life on the date of acquisition.

On January 1, 20X5, Buzz sold equipment to Woody for $91,600. Buzz had purchased this equipment on January 1, 20X3 for $100,000 and depreciated it using straight-line depreciation over 10 years with an estimated residual value of $10,000. No change was made to the estimated economic life or residual value of the equipment as a result of the intercompany transfer. Woody uses the fully adjusted equity method.

1. What adjustment is needed to depreciation expense in consolidation (related to the equipment transferred)?

a. Dr. Depreciation expense 9,000

b. Cr. Depreciation expense 9,000

c. Dr. Depreciation expense 1,200

d. Cr. Depreciation expense 1,200

2 . What entry is needed to eliminate Buzz's gain on the sale of equipment to Woody?

a. Dr. Gain on Sale9,600Dr. Equipment8,400Cr. Accumulated Depreciation18,000

b. Dr. Gain on Sale11,600Dr. Equipment8,400Cr. Accumulated Depreciation20,000

c. Dr. Accumulated Depreciation18,000Cr. Equipment 8,400Cr. Loss on Sale 9,600

d. Dr. Equipment8,400Cr. Accumulated Depreciation8,400