Question: The Auto Clinic is a wholly owned subsidiary of Fast Check
The Auto Clinic is a wholly owned subsidiary of Fast-Check Equipment Company. Fast-Check Equipment sells and leases 4-wheel alignment machines. The usual selling price of each machine is $35,000; it has a cost to Fast-Check Equipment of $25,000. On January 1, 2011, Fast-Check Equipment leased such a machine to Auto Clinic. The lease provided for payments of $9,096 at the start of each year for five years. The payments include $1,000 per year for maintenance to be provided by the seller. There is a bargain purchase price of $2,000 at the end of the fifth year. The implicit interest rate in the lease is 10% per year. The equipment is being depreciated over eight years. The amortization schedule for the lease prepared by Fast-Check Equipment is as follows:
Prepare the eliminations and adjustments, in entry form, that would be required on a consolidated worksheet prepared on December 31, 2011.
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