*Downstream Depreciable Assets transaction On January 1, 2021, Penn Company purchased 80% of the outstanding common shares...
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*Downstream Depreciable Assets transaction | |||||||||||
On January 1, 2021, Penn Company purchased 80% of the outstanding common shares of Senn Company. | |||||||||||
On January 2 2021, Penn Company sold equipment with an original cost of $2,000 and a carrying value of $1,200 to Senn Co for $1,500. | |||||||||||
Penn Co. had owned the equipment for two years and used a five-year straight line depreciation with no residual value. | |||||||||||
Senn Co. is using straight-line depreciation over three years with no residual value. | |||||||||||
Senn Co. reported net income of $3,000 and Penn reported separate operating income (excluding income from Senn Co.) of $5,000 during 2021. | |||||||||||
Q1. | Prepare eliminating (consolidation) entries for intercompany transactions on December 31, 2021. | ||||||||||
(1) Elimination of excess depreciation because of the sales of equipment | |||||||||||
Account | Debit | Credit | |||||||||
Accumulated Depreciation | |||||||||||
Account | Debit | Credit | |||||||||
Gain on sale | |||||||||||
Q2. | Prepare Penn Co's fully adjusted equity method journal entries to eliminate intercompany transaction | ||||||||||
(1) Deferral of gain on sale of equipment | |||||||||||
Account | Debit | Credit | |||||||||
(2) Reversal of the deferred gain (Depreciation difference) | |||||||||||
Account | Debit | Credit | |||||||||
Q2. | What is the consolidated net income? | ||||||||||
Answer: | |||||||||||
Q3. | What is the net income attributable to NCI (NCI in NI)? | ||||||||||
Answer: | |||||||||||
Q4. | What is the Net Income attributable to Controlling Interest (Controlling Interest Net Income)? | ||||||||||
Answer: | |||||||||||
Q5. | Based on the information above, please complete the following worksheet. | ||||||||||
Penn Co. | Senn Co. | Consolidation Entries | |||||||||
DR | CR | Consolidated | |||||||||
Income Statement | |||||||||||
Sales | 23,700 | 15,000 | |||||||||
Less: COGS | (12,000) | (7,000) | |||||||||
Less: Depreciation Expense | (3,000) | (2,000) | |||||||||
Less: Other expenses | (4,000) | (3,000) | |||||||||
Gain on sale of fixed assets | 300 | ||||||||||
Income from Senn Co. | |||||||||||
Consolidated Net Income | 5,000 | 3,000 | 0 | 0 | |||||||
NCI in Net Income | |||||||||||
Controlling Interest in Net Income | 5,000 | 3,000 | 0 | 0 | |||||||
Balance sheet | |||||||||||
Equipment | 12,000 | 8,000 | |||||||||
Accumulated Depreciation | (4,000) | (3,000) |
Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
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