Question

A parent company sells equipment costing $100,000 with a book value of $ $60,000 for $90,000....

A parent company sells equipment costing $100,000 with a book value of $ $60,000 for $90,000. The equipment has a remaining useful life of 5 years. In what period and in what manner should the gain be recognized in the consolidated financial statements?

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Answer #1

Purchase Price for the company = $100,000

Book Value = $ 60,000

Selling Price = $ 90,000

Gain = Selling Price - Book Value = $ 30,000

THe gain should be booked in the period in which the equipement is sold without charging depriciation presuming that the euipement is sold on the period beginning (i.e first day of the period). Further,the company should record the gain in its profit and loss account in both consolidated financial statements and standalone financial statements.

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