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.

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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.

ekkarill92 answered 1 year ago

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