Question
In: Accounting
Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On...
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Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On January 1, 20X5, Frazer received $288,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $378,000. 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.)
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Solutions
Expert Solution
| Answer 1. | ||||
| Journal Entry | ||||
| Date | Particulars | Dr. Amt. | Cr. Amt. | |
| 1 | Gain on Sale of Truck | 23,400 | $288,000 - $264,600 | |
| Truck | 90,000 | $378,000 - $288,000 | ||
| Depreciation Exp. | 3,343 | $41,143 - $37,800 | ||
| Accumulated Depreciation | 110,057 | |||
| Accumulated Dep. Adjustment: | ||||
| Required - $378,000 X 4 / 10 | 151,200 | |||
| Reported - $288,000 / 7 | 41,143 | |||
| Required Increase | 110,057 | |||
| Answer 2. | ||||
| Journal Entry | ||||
| Date | Particulars | Dr. Amt. | Cr. Amt. | |
| 1 | Retained Earnings Dr. | 20,057 | ||
| Truck Dr. | 90,000 | |||
| To Depreciation Expenses | 3,343 | |||
| To Accumulated Depreciation | 106,714 | |||
| Accumulated Dep. Adjustment | ||||
| Required - $378,000 X 5/10 | 189,000 | |||
| Reported - $288,000 x 2/7 | 82,286 | |||
| Required Increase | 106,714 | |||
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