Smith company sold a machine to Pippen On Jan 1, year 14. Smith comp bough the...

Smith company sold a machine to Pippen On Jan 1, year 14. Smith comp bough the machine on january 1, year 11. Straight line deprecation is being used. the original life of the machine was not changed

Orignal Cost to S company 150,000

sales price to pippen company 108,750

original life of machine 8 years

What would the consolidation entries look like for P in year 2016 and how would they affect net income ans book value for year16? p owns 90 percent of s.

thanks

Expert Solution

		Journel Entries in the books of Pippen
S.No	Date	Particular	Amount ₹	Amount ₹
1	01-Jan-14	Machinary A/C Dr.		1,08,750
		To Smith A/C			1,08,750
		( being machine purchased )

2	01-Jan-14	Smith A/C Dr.		10875
		To Bank A/C			10875
		( being Pippen Own 90% to Smith and Paid 10% to Smith )

3	31-Dec-14	Deprication A/C Dr.		21750
		To Accumulated Depreciation A/C			21750
		( being Depreciation made on Machinary on SLM Method for balance life of 5 years
		( 108750 /5 = 21750 )

4	31-Dec-15	Deprication A/C Dr.		21750
		To Accumulated Depreciation A/C			21750
		( being Depreciation made on Machinary on SLM Method for balance life of 4 years
		( 108750 /5 = 21750 )

5	31-Dec-16	Deprication A/C Dr.		21750
		To Accumulated Depreciation A/C			21750
		( being Depreciation made on Machinary on SLM Method for balance life of 3 years
		( 108750 /5 = 21750 )


		Calculation of Book Value in 2016	Amount
		Value of Machinary in 2014	108750
	-	(-) Depreciation 2014	21750
		(-) Depreciation 2015	21750
		(-) Depreciation 2016	21750
			43500

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