Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On...

Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On January 1, 20X5, Frazer received $237,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $287,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis. I come up with Gain on Sale 36100 Truck 50,00 Accum Dep 86,100 But I cannot calculate out the Adjusted Depreciation. I came out to 5,000 one time and 4,800 the other. How do I calculate it out to Adjust the Depreciation? The cost above are correct according to check my work but I fail at the accum dep.

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Expert Solution

Journal entries (so far passed) in the Books of both companies:
Books of Frazer				Books of Minnow
Date	Account title	Debit	Credit	Date	Account title	Debit	Credit
Jan 1,20X1

Jan 1,20X2	Truck	287000
	Cash		287000

31-Dec	Depn.-Truck	28700
	Acc. Depn.-Truck		28700
	287000/10

20X3
	Depn.-Truck	28700
31-Dec	Acc. Depn.-Truck		28700

20X4
31-Dec	Depn.-Truck	28700
	Acc. Depn.-Truck		28700

Jan 1,20X5	Cash	237000		Jan 1,20X5	Truck	237000
	Acc. Depn.-Truck	86100			Cash		237000
	Truck		287000
	Gain on sale		36100
				31-Dec	Depn.-Truck	23700
					Acc. Depn.-Truck		23700
					237000/10


Consolidation entry to remove effects of inter-company sale
(To reverse all related accounts)
12/31/20X5	Gain on sale	36100
	Truck(287000-237000)	50000
	Acc. Depn.-Truck(86100-(60%*23700))		71880
	Depn.-Truck(60%*23700)		14220

ekkarill92 answered 1 year ago

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