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

Pitcher Corporation purchased 60 percent of Softball Corporation’s voting common stock on January 1, 20X1. On January 1, 20X5, Pitcher received $258,000 from Softball for a truck Pitcher had purchased on January 1, 20X2, for $328,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis. Required:

a. Prepare the worksheet consolidation entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare the worksheet consolidation entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale.

Solutions

Expert Solution

(A)the worksheet consolidated entries as shown below at dec 31 , 20X5

Date

Accounts and explanation

Debit $

Credit $

31-Dec

Gain on sale

61200

Truck($328000-$258000)

70000

Accumulated Depreciation

131200

(To Estimate the gain on sale of truck)

Compute the gain on Sale of Truck as shown Below

Particulars

Amount($)

Amount($)

Amount reccived from Pitcher Corp

258000

Less: Carrying Value of truck

Cost of truck

328000

Accumulated Depreciation ($328000/10Year)*4

-131200

196800

Gain on sale of truck

61200

(B) the worksheet consolidation Shown at December 31, 20X6

Date

Accounts and explanation

Debit $

Credit $

31 Dec 20X6

Investment in Pitcher Corp

61200

Truck($328000-$258000)

70000

Accumulated Depreciation

131200

(To Record the Investment in Pitcher Corp)

ekkarill92 answered 2 years ago
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