On January 1, 2014, Pueblo Corporation purchased a 75% interest

On January 1, 2014, Pueblo Corporation purchased a 75% interest in Sanchez Company for $900,000. A summary of Sanchez Company's balance sheet at date of purchase follows:

On January 1, 2014, Pueblo Corporation purchased a 75% interest

The equipment had an original life of 15 years and remaining useful life of 10 years.
During 2014 Pueblo Corporation reported income of $237,000 and paid dividends of $150,000. Sanchez
Company reported net income of $123,000 and paid dividends of $120,000. Pueblo uses the complete equity method to account for its investment in Sanchez.
Required:
A. Prepare the elimination entries for the consolidated financial statements workpaper on December 31, 2014.
Accumulated depreciation is presented on a separate row in the workpaper and in the consolidated financial statements.
B.
Assume that Sanchez Company disposed of all its equipment on January 1, 2016, for $450,000.
1. What amount of gain (loss) will Sanchez Company report?
2. What is the consolidated gain (loss)?
3. Prepare the workpaper entry necessary to allocate the amount of the difference between book value and the value implied by the purchase price that was originally allocated to the equipment that has now been sold to outsiders.
4. What work paper entry will be necessary to allocate this difference between book value and the value implied by the purchase price in future years?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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