Ped Industries manufactures heavy equipment used in construction and excavation. On January 3, 2011, Ped sold a piece of equipment from its inventory that cost $360,000 to its 60 percent-owned subsidiary, Spa Corporation, at Ped’s standard price of twice its cost. Spa is depreciating the equipment over six years using straight-line depreciation and no salvage value.
REQUIRED
1. Determine the net amount at which this equipment will be included in the consolidated balance sheets for Ped Industries and Subsidiary at December 31, 2011 and 2012.
2. Ped accounts for its investment in Spa as a one-line consolidation. Prepare the consolidation workpaper entries related to this intercompany sale that are necessary to consolidate the financial statements of Ped and Spa at December 31, 2011 and 2012.
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