P5.4 Intercompany transfer of fixed assets Parent Co purchased an equipment on 1 January 20x1 for...

 

Transcribed Image Text:

P5.4 Intercompany transfer of fixed assets Parent Co purchased an equipment on 1 January 20x1 for $200,000. The estimated useful life at that date was ten years with a nil residual value. On 1 July 20x5, Parent Co sold the equipment to Subsidiary Co for $120,000. Parent Co had a 90% ownership interest in Subsidiary Co. On 1 July 20x5, the remaining economic useful life was re- estimated as seven years. Net profit after tax of Subsidiary Co for 20x5 was $500,000. Assume a tax rate of 20% throughout. Required: 1. Show the consolidated journal entries for 20x5 relating to the above transaction. 2. If the situation had been reversed in that it was Subsidiary Co that sold the equipment to Parent Co, show the consolidated journal entries for 20x5. P5.4 Intercompany transfer of fixed assets Parent Co purchased an equipment on 1 January 20x1 for $200,000. The estimated useful life at that date was ten years with a nil residual value. On 1 July 20x5, Parent Co sold the equipment to Subsidiary Co for $120,000. Parent Co had a 90% ownership interest in Subsidiary Co. On 1 July 20x5, the remaining economic useful life was re- estimated as seven years. Net profit after tax of Subsidiary Co for 20x5 was $500,000. Assume a tax rate of 20% throughout. Required: 1. Show the consolidated journal entries for 20x5 relating to the above transaction. 2. If the situation had been reversed in that it was Subsidiary Co that sold the equipment to Parent Co, show the consolidated journal entries for 20x5.

Answer rating: 100% (QA)

1 Journal entries relating to the transfer from Parent Co to Subsidiary Co Parent Co Dr Equipment at ... View the full answer