On January 1, 2012, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sale. The machine has a 5-year remaining life and will be depreciated on a straight-line basis with no salvage value. Safari Company is an 80%-owned subsidiary of Jungle Company.
1. Explain the adjustments that would have to be made to arrive at consolidated net income for the years 2012 through 2016 as a result of this sale.
2. Prepare the elimination that would be required on the December 31, 2012, consolidated worksheet as a result of this sale.
3. Prepare the entry for the December 31, 2013, worksheet as a result of this sale.