Eisenhower Construction, a privately held company, used to own all of its construction equipment used for highway work (bulldozers, cranes, graders, cement trucks). The company recently sold all of the equipment to the owner's son. The son is a 25% stockholder in Eishenhower Construction. The son's new business, Construction Rental, Inc., is 75% owned by the son and 25% owned by the father (75% owner of Eisenhower Construction). Construction Rental has grown dramatically such that less than 20% of its construction rental business is done with Eisenhower Construction. Further, Eisenhower Construction rents about 60% of its equipment from Constructional Rental and leases another 40% from Fabio, an independent company. You have been assigned to perform the audit of Eisenhower Construction Company

Required

a. What is the proper accounting and disclosure of the sale of the equipment during the year on the books and in the financial statements of Eisenhower Construction Company?

b. What is the required disclosure of the rental equipment that was rented from Constructional Rental?

c. It turns out that the construction company also does water and sewer work and rents most of the smaller equipment from a daughter of the company's president. However, these rentals were not disclosed to the auditor. What audit procedures would have uncovered the existence of this other related-entity transaction?