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Ponds owned a machine with an original cost of $100,000. It had been depreciated in the...

Ponds owned a machine with an original cost of $100,000. It had been depreciated in the last 7 years on the straight-line method with 10 years of life and no salvage value. On January 1, 2017, Ponds sold the machine to Square One Corporation (a 75%-owned subsidiary) for $42.000 in cash.

Thereafter, Square One provided for depreciation also on the straight-line method with 3 more years of life after the date of purchase and no salvage value. On Jan 1, 2019, Square One sold the machine to an outside company for $15,000

1)Prepare the working paper entries for the intercompany sale of machine on December 31,2017.

2 Prepare the working paper entries relating to the machine on December 31,2018.

3)Bonus Question: Prepare the working paper entries relating to the machine on December 31,2019.

Business   Accounting   
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Answer #1

1.

Square One Corporation AC Dr $42,000

Income from Sale of asset Cr $42,000

Cash Ac Dr.42,000

To Square One Corporation a/c 42,000

(Being income from sale of asset)

2. Dec 31,2018

Machine A/c DR $42,000

To cash Ac $42,000

(Being asset additions)

Depreciation a/c Dr.$14,000

To Machine A/c $14,000

(Depreciation ($42,000 / 3) charged for Year end Dec 31 2018 )

3. While the asset sold by parent company

Cash ac dr. $15,000

To Machine Ac $14,000

To Income from Machine $1,000

(Being asset sold on gain)

Kindly give me a ?.It helps me. Thanks!!

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