Question

Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the elimination of each independent intercompany transaction:

Prepare the book calculations

Requirements:

Complete all work on the spreadsheet attached to this assignment; it will be your only deliverable.

Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make good use of comments to convey your thought process as well. No hard coding of solutions. Submit a single MS Excel file for grading.

Review the grading rubric to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.

Assume that Parent Company decides to sell Equipment (Cost = $10,000, Accumlated Depreciation = $1,000) to Sub for $20,000 cash. Show the sale and the subsequent elimination entries by Parent Company
Parent Company Balance Sheet			Sale by Parent
Assets, Liabilities & Equities	Book Value		Account	DR	CR
Cash	$1,500,000
AR	$10,000
Inventory	$200,000
Land	$640,000
Equipment	$400,000
Accumulated Depreciation	-$150,000
			Acquisition by Sub
Patent	$0		Account	DR	CR
Total Assets	$2,600,000
AP	$100,000
Common Stock	$450,000
Additional Paid In Capital	$600,000
Retained Earnings	$1,450,000		Elimination Entries by Parent
Total Liabilities & Equity	$2,600,000		Account	DR	CR
Sub Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$35,000
AR	$10,000
Inventory	$65,000
Land	$40,000
PP&E	$400,000
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$400,000
AP	$100,000
Common Stock	$100,000
Additional Paid In Capital	$50,000
Retained Earnings	$150,000
Total Liabilities & Equity	$400,000
Assume that book Value = Fair Value

Answer 1

	Sale By Parent
	Account		Dr	Cr
	Cash		$20,000
	Accumulated Depreciation		$1,000
	To Equipment			$10,000
	To Gain On Sale on Equipment			$11,000
	(Being Equipment sold to Sub)
	Acquisition By Sub
	Account		Dr	Cr
	Equipment		$20,000
	To Cash			$20,000
	(Being Equipment purchased from parent)
	Elimination Entries by Parent
	Account		Dr	Cr
	Gain on Sale		$11,000
	To Accumulated Depreciation			$1,000
	To Machine			$10,000
	(Being elimination entry by Parent)