Problem 4-6 (LO 3) 80%, equity, fixed asset sales by subsidiary and parent. On September 1, 20X1, Parcel Corporation purchased 80% of the outstanding common stock of Sack Corporation for $152,000. On that date, Sack’s net book values equaled fair values, and there was no excess of cost or book value resulting from the purchase. Parcel has been maintaining its investment under the simple equity method.

Over the next 3 years, the intercompany transactions between the companies were as follows:

a. On September 1, 20X1, Sack sold its 4-year-old delivery truck to Parcel for $14,000 in cash.

At that time, Sack had depreciated the truck, which had cost $15,000, to its $5,000 salvage value. Parcel estimated on the date of the sale that the asset had a remaining useful life of 3 years and no salvage value.

b. On September 1, 20X2, Parcel sold equipment to Sack for $103,000. Parcel originally paid

$80,000 for the equipment and planned to depreciate it over 20 years, assuming no salvage value. However, Parcel had the property for only 10 years and carried it at a net book value of $40,000 on the sale date. Sack will use the equipment for 10 years, at which time Sack expects no salvage value.