Question

Loss on intercompany transfers of depreciable noncurrent assets Assume that a parent company owns a 100%...

Loss on intercompany transfers of depreciable noncurrent assets

Assume that a parent company owns a 100% controlling interest in its long-held subsidiary. On December 31, 2019, a parent company sold equipment to the subsidiary for $120,000. The equipment originally cost the parent $210,000, and accumulated depreciation through December 31, 2019 was $35,000. The parent depreciated the equipment for 12 years using the straight-line method and no salvage value. After the transfer, the subsidiary will depreciate the equipment for 10 years with no salvage value. Related to the transferred equipment, which of the following items is true regarding the preparation of the consolidated financial statements for the year ending December 31, 2019?

The consolidation entries will include a $55,000 credit to “Loss on Sale of Equipment”

The consolidation entries will include a $55,000 debit to “Loss on Sale of Equipment”

The consolidation entries will include a $90,000 credit to “Equipment (gross)”

The consolidation entries will include a $35,000 debit to “Accumulated depreciation”

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:

Option A.The consolidation entries will include a $55,000 credit to ''loss on sale of equipment''.

the following will be the required consolidation entry.

Equipment a/c $90,000
............To Accumulated depreciation a/c $35,000
...............To Loss on sale of equipment a/c $55,000

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest...
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. On January 1, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2019, the subsidiary sold the building...
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest...
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. On January 1, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2019, the subsidiary sold the building...
Preparing the [I] consolidation entries for sale of depreciable assets—Cost method Assume on January 1, 2016,...
Preparing the [I] consolidation entries for sale of depreciable assets—Cost method Assume on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $100,000, equipment that originally cost $120,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The subsidiary has adopted the parent’s depreciation policy and depreciates the equipment over the remaining useful life of 8 years. The...
Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts...
Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent’s and subsidiary’s “stand-alone” pre-consolidation income statements for the year ending in December 31, 2019, prior to any investment bookkeeping or intercompany adjustments. Parent Subsidiary Revenues 4,000,000 2,500,000 Cost of goods sold (2,800,000) (1,500,000) Gross profit 1,200,000 1,000,000 Selling general & administrative expenses (780,000) (606,000) Net income 420,000 394,000 On January 1, 2019, neither company held any inventories purchased from the...
Q1 . Assume Parent Co. owns 100% of Sub Co. The following intercompany transactions occurred during...
Q1 . Assume Parent Co. owns 100% of Sub Co. The following intercompany transactions occurred during the year: Parent loaned SAR 500 to Sub. Parent made a sale to Sub for SAR 400 cash. The inventory had originally cost Parent SAR 250. Sub then sold that same inventory to an outsider for SAR 500. Required: What consolidation worksheet entries would you make? Q2. Distinguish between an upstream sale of inventory and a downstream sale. Why is it important to know...
Assume that a parent company purchased less than 100% of the voting common stock when it...
Assume that a parent company purchased less than 100% of the voting common stock when it acquired a controlling interest in a subsidiary on August 15, 2019. The parent uses the equity method to account for the subsidiary on its pre-consolidation books. Both companies have a December 31, 2019 fiscal year end. Which of the following statements is correct? A.In the balance sheet prepared immediately after the acquisition, the parent company's pre-consolidation retained earnings will always equal consolidated retained earnings....
Parent Company owns 55% of Subsidiary company. The 2019 Income Statements of both companies are as...
Parent Company owns 55% of Subsidiary company. The 2019 Income Statements of both companies are as following below. Fiscal Year in both companies end same on December 31. Both companies have a tax rate of 35%. Parent Sub Gross Profit 80,000 60,000 Miscellaneous Expenses 20,000 20,000 Depreciation Expense 30,000 15,000 Income Tax Expense 10,500 8,750 NET INCOME $ 19,500 $16,250 On July 01, 2019 Subsidiary sold equipment to Parent at a profit of $9,000 (before tax). The equipment had a...
Consolidated gain or loss on constructive retirement of debt Assume that a Parent Company owns 100...
Consolidated gain or loss on constructive retirement of debt Assume that a Parent Company owns 100 percent of its Subsidiary. Each of the following independent scenarios describes an intercompany bond transaction between the Parent and the Subsidiary. For each independent case, determine the amount of gain or loss on constructive retirement of the bond reported in the consolidated income statement for the year ended December 31, 2019. Assume straight-line amortization. a. On June 30, 2019, P issues directly to S...
Parent Company holds 75 percent of Surrogate Company’s voting common shares. On December 31, 20X8, Parent...
Parent Company holds 75 percent of Surrogate Company’s voting common shares. On December 31, 20X8, Parent recorded a loss of $20,000 on the sale of equipment to Surrogate. At the time of the sale, the equipment’s estimated remaining economic life was eight years. Required: a. Will consolidated net income be increased or decreased when consolidation entries associated with the sale of equipment are made at December 31, 20X8? By what amount?
Presented below are selected transactions for the Cullumber Company for 2023. Jan. 1 Retired a piece...
Presented below are selected transactions for the Cullumber Company for 2023. Jan. 1 Retired a piece of equipment that was purchased on January 1, 2013. The equipment cost $75,000 on that date and had a useful life of 10 years with no salvage value. April 30 Sold equipment for $38,000 that was purchased on January 1, 2020. The equipment cost $105,000 and had a useful life of 5 years with no salvage value. Dec. 31 Discarded equipment that was purchased...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT