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 |
|||||
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