Question

In: Accounting

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 $225,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $275,000. 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.)
1. Record the entry to eliminate the gain on the truck and to correct the asset's basis.
2. Record the entry to adjust Accumulated Depreciation.
b. Prepare the worksheet consolidation entry or entries needed at December 31, 20X6, 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.)
1. Record the entry to eliminate the gain on the truck and to correct the asset's basis.
2. Record the entry to adjust Accumulated Depreciation.

Solutions

Expert Solution

a

Give the worksheet eliminating entry on entries needed at december 31 20X5

Particulars

Debit

Credit

Gain on sale of truck

32143

Truck (275000-225000)

50000

      Depreciation expense

77857

      Accumulated Depreciation

4286

Accumulated depreciation adjustment

$

Required depreciation

[($275000/10 years*4 years]

110000

Reported depreciation

[($225,000/7 years * 1 year]

-32143

Required increase

77857

b

Give the worksheet eliminating entry on entries needed at december 31 20X6

Particulars

Debit

Credit

Retained earnings Jan 1 (bal.fig)

27857

Truck

50000

      Depreciation expense (77857-73214)

4643

      Accumulated Depreciation

73214

Accumulated depreciation adjustment

Required depreciation

$

[($275000/10 years*5 years]

137500

Reported depreciation

[($225,000/7 years * 2 year]

-64286

Required increase

73214

ekkarill92 answered 1 year ago
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