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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 2 years ago
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