(2) At the beginning of 2019, the subsidiary sold equipment with a 5-year remaining life and a...
(2) At the beginning of 2019, the subsidiary sold equipment with a 5-year remaining life and a net book value of $50,000(book value; $70,000 and accumulated depreciation; $20,000) to its parent for $80,000. The parent still holds the equipment at the end of 2020.
Required
- Prepare the eliminating entries (I) for the 2020 consolidation working paper for the above intercompany transaction.(6 pts)
- Now assume that the equipment was sold to an outside company at the end of 2020. Repeat the requirements of part a.(3 pts)
- Now assume that the equipment was sold to an outside company at the beginning of 2020. Repeat the requirements of part a.(3 pts)
Homework Answers
1) When sales are made by subsidiary to holding entity, there is need to eliminate the profit earned by subsidiary on this transaction by passing the following journal entry in consolidated accounts :
a) Retained Earnings A/c---------Dr. $ 6,000
To Equipment / Assets A/c------Cr $ 6,000
(Being retained earning reduced for intercompany transaction)
Calculation : Total profit = 30000
Life of Equipment = 5 years
Profit allocated to 2019 = 30000/ 5 = $ 6000
b) Statement of Income_____Dr. $ 6,000
To Equipment A/c_____Cr. $ 6,000
(Being intercompany profit reduced for year 2020)
2) When the equipment was sold to an outside company, no intercompany profit arises on this transaction. So no elimination of profit needed in this case.
3) If the consolidation has taken place after the sale of equipment to outside company then while working out the consolidated profit, the pre-consolidation profit needs to be separated to post-consolidation profit.
Add Answer to:
(2) At the beginning of 2019,
the subsidiary sold equipment with a 5-year
remaining life and a...
At the beginning of 2019, a subsidiary sells equipment with a book value of $400,000 to...
At the beginning of 2019, a subsidiary sells equipment with a book value of $400,000 to its parent for $500,000. At the time of the sale, the equipment had a remaining life of 5 years, straight-line. The parent sold the equipment to an outside buyer for $470,000 at the end of 2020 (2 years later). The consolidation eliminating entry needed to consolidate the accounts of the parent and subsidiary at the end of 2020 has what effect? A. Increase gain...
On July 1, 2018, Pearl Industries sold administrative equipment with a book value of $1,000,000 to...
On July 1, 2018, Pearl Industries sold administrative equipment with a book value of $1,000,000 to its subsidiary, Shiek Shoes, for $800,000. At the date of sale, the equipment had a remaining life of five years. It is being straight-line depreciated on Shiek's books. It is now December 31, 2020, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Shiek still owns the equipment. a. Prepare the...
At the beginning of 2019, a parent sells equipment with a book value of $400,000 to...
At the beginning of 2019, a parent sells equipment with a book value of $400,000 to its subsidiary for $500,000. At the time of the sale, the equipment had a remaining life of 5 years, straight-line. The subsidiary sold the equipment to an outside buyer for $470,000 at the end of 2021 (3 years later). The consolidation eliminating entry needed to consolidate the accounts of the parent and subsidiary at the end of 2021 has what effect? A. Increase investment...
A subsidiary sells merchandise to its parent at a markup of 25% on cost. In the...
A subsidiary sells merchandise to its parent at a markup of 25% on cost. In the current year, the parent had $75,000 in merchandise purchased from the subsidiary in its beginning inventory. During the current year, the parent paid $750,000 for merchandise from the subsidiary. By year-end, the parent has sold $700,000 of merchandise purchased from the subsidiary to outside customers for $900,000. How do the consolidation working paper eliminating entries affect cost of goods sold? A. net credit of...
A parent sells merchandise to its subsidiary at a markup of 20% on cost. In the...
A parent sells merchandise to its subsidiary at a markup of 20% on cost. In the current year, the subsidiary had $120,000 in merchandise purchased from the parent in its beginning inventory. During the current year, the subsidiary paid the parent $720,000 for merchandise, and sold merchandise purchased from the parent to outside customers for $870,000. At year-end, the subsidiary has $180,000 in merchandise purchased from the parent in its ending inventory. How do the consolidation working paper eliminating entries...
A parent acquires the voting stock of a subsidiary on January 1, 2019. Required revaluations of...
A parent acquires the voting stock of a subsidiary on January 1, 2019. Required revaluations of the subsidiary's net assets are: * Previously unreported identifiable intangibles valued at $3 million, with a remaining life of 10 years, straight-line * Goodwill It is now December 31, 2021, three years after the acquisition. The goodwill is unimpaired during this period. The parent reports its investment in the subsidiary using the cost method. The subsidiary reports the following net income, other comprehensive income,...
question 2 Question 5 2-On Jan 2, 2020, Parent sells to its wholly owned investee equipment...
question 2
Question 5
2-On Jan 2, 2020, Parent sells to its wholly owned investee equipment that had cost $250,000. The selling price was $180,000 and accumulated depreciation on that date was $75,000. The subsidiary depreciates the equipment over its remaining life of 10 years. Required: a. Compute the difference between the annual depreciation expense when Parent owned the equipment and depreciation expense recorded by the subsidiary. b. Compute the gain on sale recorded by the parent. c. Prepare the...
Intercompany Transactions – Equity Method 60 points Parent purchased 100% of a Subsidiary on January 1,...
Intercompany Transactions – Equity Method 60 points Parent purchased 100% of a Subsidiary on January 1, 2020. The excess of investment cost over book value of $350,000 was allocated entirely to a 7-year royalty agreement. The parent uses the equity method to account for its investment in its subsidiary. In 2021, Subsidiary sold to Parent land having a book value of $90,000 for a total price of $244,000. On January 2, 2022, Parent sold equipment to Subsidiary for $120,000. The...
17. A parent company consolidates its 80%-owned subsidiary. It is now December 31, 2021. The following...
17. A parent company consolidates its 80%-owned subsidiary. It is now December 31, 2021. The following information is available: • The subsidiary's reported net income for 2021 is $30,000. • The subsidiary sells merchandise to the parent at a markup of 15% on cost. The parent's 2021 ending inventory balance contains $1,725 in merchandise purchased from the subsidiary. The parent's 2021 beginning inventory contains $2,300 in merchandise purchased from the subsidiary. Total sales price of merchandise transferred between the subsidiary...
50. Prepare consolidation spreadsheet for intercompany sale of equipment-Equity method Assume a parent company acquired its...
50. Prepare consolidation spreadsheet for intercompany sale of
equipment-Equity method Assume a parent company acquired its
subsidiary on January 1, 2015, at a purchase price that was
$222,000 in excess of the book value of the subsidiary's
Stockholders' Equity on the acquisition date. Of that excess,
$132,000 was assigned to a Customer List that is being amortized
over a 10-year period. The remaining $90,000 was assigned to
Goodwill. In January of 2018, the wholly owned subsidiary sold
Equipment to the...
question 2
Question 5
2-On Jan 2, 2020, Parent sells to its wholly owned investee equipment that had cost $250,000. The selling price was $180,000 and accumulated depreciation on that date was $75,000. The subsidiary depreciates the equipment over its remaining life of 10 years. Required: a. Compute the difference between the annual depreciation expense when Parent owned the equipment and depreciation expense recorded by the subsidiary. b. Compute the gain on sale recorded by the parent. c. Prepare the...
17. A parent company consolidates its 80%-owned subsidiary. It is now December 31, 2021. The following information is available: • The subsidiary's reported net income for 2021 is $30,000. • The subsidiary sells merchandise to the parent at a markup of 15% on cost. The parent's 2021 ending inventory balance contains $1,725 in merchandise purchased from the subsidiary. The parent's 2021 beginning inventory contains $2,300 in merchandise purchased from the subsidiary. Total sales price of merchandise transferred between the subsidiary...
50. Prepare consolidation spreadsheet for intercompany sale of
equipment-Equity method Assume a parent company acquired its
subsidiary on January 1, 2015, at a purchase price that was
$222,000 in excess of the book value of the subsidiary's
Stockholders' Equity on the acquisition date. Of that excess,
$132,000 was assigned to a Customer List that is being amortized
over a 10-year period. The remaining $90,000 was assigned to
Goodwill. In January of 2018, the wholly owned subsidiary sold
Equipment to the...
Most questions answered within 3 hours.
-
Using MARS simulator, write MIPS programs according to
the following scenarios: Receive a positive integer number...
asked 1 hour ago -
An object in front of a concave mirror has a real image that is
11.5 cm...
asked 1 hour ago -
Consider the reaction, C3 H8 + O2 --> CO2 + H2O. How many
moles of O2...
asked 3 hours ago -
You and your opponent both roll a fair die. If you both roll the
same number,...
asked 3 hours ago -
In a study of the accuracy of fast food drive-through orders,
Restaurant A had 257 accurate...
asked 3 hours ago -
Identify and describe in detail the four categories of
institutions that could be included in a...
asked 3 hours ago -
In python
class Customer:
def __init__(self, customer_id, last_name, first_name, phone_number, address):
self._customer_id = int(customer_id)
self._last_name =...
asked 3 hours ago -
What is an example of a limitation in implementing a new
ERP system and how it...
asked 3 hours ago -
In a section of 9.7cm of an artery with a radius of 2.6mm there
is a...
asked 3 hours ago -
the two carboxylic acid groups of aspartic acid have different
acidities with pKa values of 2.1...
asked 3 hours ago -
Would CuCO3 aqueous salt combined with calcium chloride
form a solid precipitate? If so, what would...
asked 3 hours ago -
How do ECM Solutions assist in embedding a culture of continuous
improvement in an organization? (Project...
asked 3 hours ago