Question

Pitcher Corporation purchased 60 percent of Softball Corporation’s voting common stock on January 1, 20X1. On January 1, 20X5, Pitcher received $231,000 from Softball for a truck Pitcher had purchased on January 1, 20X2, for $311,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis.

Event Accounts Credit No А Gain on sale Debit 13,300 80,000 Truck Accumulated depreciation 93,300 Accumulated depreciation Depreciation expense b. Prepare the worksheet consolidation entry or entries needed at December 31, 20X6, to remove the effects of the ir sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) % Answer is not complete. Event Debit Credit No А Accounts Investment in Softball Corporation Truck Accumulated depreciation 80,000 > Accumulated depreciation Depreciation expense

Answer 1

Requirement a: Prepare the following worksheet consolidation entry in December 31, 20X5 to remove the effects inter company sale

Event	Account Title and Explanation	Debit	Credit
2	Accumulated Depreciation ($13,300 ÷ 7 years)	$1,900
	Depreciation Expense		$1,900
	To remove the effects of extra depreciation

Requirement b: Prepare the following worksheet consolidation entry in December 31, 20X6 to remove the effects inter company sale

Event	Account Title and Explanation	Debit	Credit
1	Investment in subsidiary ($13,300 − $1,900)	$11,400
	Truck	$80,000
	Accumulated Depreciation		$91,400
	To eliminate the gain on truck sold
2	Accumulated Depreciation ($13,300 ÷ 7 years)	$1,900
	Depreciation Expense		$1,900
	To eliminate the effect of extra depreciation