Grand Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2016. The machine has an estimated useful life of ten years, and will be depreciated straight-line with no salvage value. The machine was leased on January 1, 2016, to Sunshine Engineering Company, an 80% owned subsidiary, under a five-year operating lease for $10,000 per year, payable each January 1^st.

Required:

Prepare the actual journal entries recorded by Grande Machinery to account for the machine and the lease in 2016.

Prepare the actual journal entries recorded by Sunshine Engineering to account for the machine and the lease in 2016.

Prepare the work paper elimination entries needed to prepare consolidated financial statements for the year ended December 31, 2016.

Answer rating: 100% (QA)

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