Question

In: Accounting

On January 1, Year 1, Josh Corp. sold equipment to Mayfair Inc. (its 100% sub) for...

On January 1, Year 1, Josh Corp. sold equipment to Mayfair Inc. (its 100% sub) for $120,000 in cash. The equipment originally cost $160,000 but had a book value of $96,000 when transferred. On that date, the equipment had a five-year remaining life

1.       Prepare the consolidation entries relating to the equipment sale for 12/31, Year 1.

2.      Prepare the consolidation entries relating to the equipment sale for 12/31, Year 2.

Solutions

Expert Solution

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
Josh Corp. Amount $
Sale value of equipment      120,000.00
Less: Carrying value of equipment sold        96,000.00
Gain on sale        24,000.00
Original cost of equipment      160,000.00
Less: Carrying value of equipment sold        96,000.00
Accumulated depreciation- equipment        64,000.00
Elimination entry
Year Nature Account Debit $ Credit $ Note
Year 1 To eliminate gain on sale Gain on sale     24,000.00
Equipment      24,000.00
To reinstate Accumulated depreciation Equipment     64,000.00
Accumulated depreciation      64,000.00
Year 2 To eliminate gain on sale Retained Earnings     24,000.00
Equipment      24,000.00
To adjust depreciation expense Accumulated depreciation     24,000.00 This is $ 120,000/ 5 years.
Depreciation expense      19,200.00 This is $ 24,000 less $ 4,800.
Retained Earnings        4,800.00 This is $ 24,000/ 5 years.

Related Solutions

On January 1, 2020, Uniform Co. sold its 2-year old equipment to XYZ Inc. for a...
On January 1, 2020, Uniform Co. sold its 2-year old equipment to XYZ Inc. for a cash down-payment of P100,000 and a non-interest bearing note with a face amount of P900,000 due December 31, 2021. There is no established price for the equipment but its carrying amount on the company’s books was at P600,000. The prevailing market rate of interest for similar note of this type on the transaction date was at 10%. On December 31, 2020 XYZ developed a...
1. During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub...
1. During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub sold all but 10,000 of the inventory purchased from Parent for 70,000 to external entities. What is the unrealized gross profit? 2.During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub sold all but 10,000 of the inventory purchased from Parent for 70,000 to external entities. What is the gross profit percent? 3.During 2012, Parent sold inventory originally costing...
On January 1, Poe Corp. sold a machine for $4,798,243 to Saxe Corp., its wholly-owned subsidiary....
On January 1, Poe Corp. sold a machine for $4,798,243 to Saxe Corp., its wholly-owned subsidiary. Poe paid $1.1 million for this machine, which had accumulated depreciation of $250,000 on the sale date. Poe estimated a $100,000 salvage value and depreciated the machine on the straight-line basis over 20 years, a policy that Saxe continued. In Poe's December 31 consolidated balance sheet, the accumulated depreciation of this machine should be shown on the consolidated balance sheet as:
On January 1, ABC Inc. sold used equipment with a cost of $14,500 and a carrying...
On January 1, ABC Inc. sold used equipment with a cost of $14,500 and a carrying amount of $1,300 to XYZ Inc. in exchange for a $6,600, three-year non–interest-bearing note receivable. Although no interest was specified, the market rate for a loan of that risk would be 7%. Assume that Teal Mountain follows IFRS. (a) Prepare the entry to record the sale of ABC’s equipment and receipt of the note. (b) Prepare the entries to record the recognition of interest...
1. On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s...
1. On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s original cost was $200,000 and as of January 1, 2017, $20,000 in depreciation had been recorded on the subsidiary’s books. At the date of sale, the equipment had a 10-year remaining life, straight-line. It is now December 31, 2021 (5 years since the sale), and the parent still holds the equipment. REQUIRED: Prepare the consolidation eliminating entries for 2021 2. Baracus, Inc. pays $95,000...
Grey Corp owns 100% of Blue Company. On January 1, 2017 Grey sold Blue a machine...
Grey Corp owns 100% of Blue Company. On January 1, 2017 Grey sold Blue a machine for $67,405. Immediately prior to the sale, the machine was recorded on Grey's books at a net book value of $21,511. Prior to the sale, Grey was depreciating the machine on a straight-line basis with 5 years of remaining life and no salvage value. Blue plans to adopt the same depreciation assumptions as Grey. What elimination adjustments with respect to this sale must be...
Grey Corp owns 100% of Blue Company. On January 1, 2017 Grey sold Blue a machine...
Grey Corp owns 100% of Blue Company. On January 1, 2017 Grey sold Blue a machine for $64,192. Immediately prior to the sale, the machine was recorded on Grey's books at a net book value of $21,413. Prior to the sale, Grey was depreciating the machine on a straight-line basis with 7 years of remaining life and no salvage value. Blue plans to adopt the same depreciation assumptions as Grey. What elimination adjustments with respect to this sale must be...
At the beginning of year 1, sub sold 5 year at 6% for $1,000,000 bonds with...
At the beginning of year 1, sub sold 5 year at 6% for $1,000,000 bonds with annual interest payment when market was 8%. At the end of the first year, the parent of the sub purchased 80% of these bonds when market was at 3%. Prepare all the necessary journal entries and eliminations for the 5 years, assume interest method was used by sub and parent.
Scape Corp. manufactures telephony equipment. Scape leased equipment to User, Inc. on January 1, 2018. Scape...
Scape Corp. manufactures telephony equipment. Scape leased equipment to User, Inc. on January 1, 2018. Scape produced the equipment at a cost of $5,100,000. Lease description: Quarterly rental payments $464,353 at beginning of each period Lease term 6 years (24 quarters) No residual value; no BPO Economic life of equipment 6 years Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset $8,100,000 Required: Prepare appropriate entries for both User and Scape from the beginning of the...
On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s original...
On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s original cost was $200,000 and as of January 1, 2017, $20,000 in depreciation had been recorded on the subsidiary’s books. At the date of sale, the equipment had a 10-year remaining life, straight-line. It is now December 31, 2021 (5 years since the sale), and the parent still holds the equipment. REQUIRED: Prepare the consolidation eliminating entries for 2021
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT