On January 1, 2012, P Company purchased equipment from its 80% owned subsidiary for $600,000. The carrying value of the equipment on the books of S Company was $450,000. The equipment had a remaining useful life of six years on January 1, 2012. On January 1, 2013, P Company sold the equipment to an outside party for $550,000.

Required:

A. Prepare in general journal form the entries necessary in 2012 and 2013 on the books of P Company to account for the purchase and sale of the equipment.

B. Determine the consolidated gain or loss on the sale of the equipment and prepare in general journal form the entry necessary on the December 31, 2013, consolidated statements workpaper to properly reflect this gain or loss.