Question
In: Accounting
Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic. Instead, on...
Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic. Instead, on January 1, 2020, Scenic sold equipment (that originally cost $120,000 but had a $73,000 book value on that date) to Placid Lake for $96,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2021, consolidation of these two companies to eliminate the impact of the intra-entity transfer?
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Expert Solution
| Journal Entry | ||||
| Sr. No. | Date | Account Titles & Explanation | Debit ($) | Credit ($) |
| 1 | Dec. 31, 2021 | Retained Earning Dr. | 23,000 | |
| To Equipment | 23,000 | |||
| (Being profit on intra-entity trasfer eliminated) | ||||
| Dec. 31, 2021 | Depreciation Dr. | 19,200 | ||
| To Equipment | 19,200 | |||
| (Being Depreciation charged on equipment) | ||||
| Working:- | ||||
| Selling price of Equipment | 96,000 | |||
| Less:- Book Value of equipment | 73,000 | |||
| Profit on Sale of equipment | 23,000 |
ekkarill92 answered 10 months agoRelated Solutions
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Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January...
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voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a
net book value of $400,000. Any excess fair value was assigned to
intangible assets and amortized at a rate of $5,000 per year.
Placid Lake’s 2015 net income before consideration of its
relationship with Scenic (and before adjustments for intra-entity
sales) was $300,000. Scenic reported net income of $110,000. Placid
Lake declared $100,000 in dividends during this period;...
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intangible assets and amortized at a rate of $7,000 per year.
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relationship with Scenic (and before adjustments for intra-entity
sales) was $390,000. Scenic reported net income of $200,000. Placid
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Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 80 percent of the outstanding
voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a
net book value of $400,000. Any excess fair value was assigned to
intangible assets and amortized at a rate of $5,000 per year.
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relationship with Scenic (and before adjustments for intra-entity
sales) was $300,000. Scenic reported net income of $110,000. Placid
Lake declared $100,000 in dividends during this period;...
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voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a
net book value of $490,000. Any excess fair value was assigned to
intangible assets and amortized at a rate of $7,000 per year.
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relationship with Scenic (and before adjustments for intra-entity
sales) was $390,000. Scenic reported net income of $200,000. Placid
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loss and a gain are always recognized in a consolidated income
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A loss and a gain are deferred until the land is sold to an
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To find the gross profit percentage from intra-entity sales,
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profit in the intra-entity sales.D. divide the transfer price by the cost of the goods.E. divide the transfer price by the gross profit on the
intra-entity sales
How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in...
How are intra-entity inventory transfers treated on the
consolidation worksheet and how are they reflected in a
consolidated statement of cash flows?
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