Question

Procter Company owns 90% of the outstanding stock of Silex Company. On January 1, 2014, Silex...

Procter Company owns 90% of the outstanding stock of Silex Company. On January 1, 2014, Silex Company sold

land to Procter Company for $350,000. Silex had originally purchased the land on June 30, 2010, for $200,000.

Procter Company plans to construct a building on the land bought from Silex in which it will house new

production machinery. The estimated useful life of the building and the new machinery is 15 years.

Required:

A. Prepare the entries on the books of Procter related to the intercompany sale of land for the years ended

December 31, 2014, and December 31, 2015.

B. Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in:

(1) The consolidated financial statements workpaper for the year ended December 31, 2014.

(2) The consolidated financial statements workpaper for the year ended December 31, 2015.

Business   Accounting   
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Answer #1
A Date Account Titles and Explanation Debit Credit
Entry on Books of Silex
Cash $350,000
Land $200,000
Gain on sale $150,000
Entry on Books of Procter
Land $350,000
Cash $350,000
Equity in income $135,000
Investment in Silex $135,000
B(1)
Gain on Sale of Land $150,000
Land ($350,000 - $200,000) $150,000
B(2) Cost Method and Partial Equity Method
Beg. Retained Earnings – Procter $135,000
Beg. Non-controlling Interest $15,000
Land $150,000
Complete Equity Method
Investment in Silex Company $135,000
Beg/ Non-controlling Interest $15,000
Land $150,000
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