Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale
Question:
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $364,500, equipment that originally cost $414,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The subsidiary has adopted the parent’s depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the equity method to account for its Equity Investment.
a. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary - depreciation $Answer
Parent - depreciation $Answer
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$Answer
c. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation).
Description | Debit | Credit | |
---|---|---|---|
[lgain] | Equipment | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
[ldep] | AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment).
Description | Debit | Credit | |
---|---|---|---|
[lgain] | Equipment | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer | |
[ldep] | AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSale | Answer | Answer |
AnswerAccounts payableAccounts receivableAccumulated depreciationAPICCashCommon stockCost of goods soldDepreciation expenseEquipmentEquity investmentGain on saleLoss on saleGoodwillInventoryLandRetained earningsSales | Answer | Answer |
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield