Question

c. Panther sells Staffer a building on January 1, 2018, for $176,000, although its book value was only $110,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value. Determine the balances that would appear on consolidated financial statements for 2019 for the following accounts: • Buildings (net) • Operating Expenses • Noncontrolling Interest in Subsidiary’s Net Income

Answer 1

Amount for which Panther sold the building to Staffer on 1st January 2018 = $176,000

Building book value on this date = $110,000 and remaining life was 5 years

Depreciation each year was supposed to be recorded was =110,000/ 5 = $22,000 (using straight line)

Gain on sale of fixed assets = 176,000 -110,000 = $66,000

Balances in financials statement for 2019:

1) Buildings (net): Sold building book value will be taken out from total Building (net). Whatever building amount under gross building and accumulated depreciated - difference should $110,000 should be taken out in 2018 accounts only. Hence 2019 financial statements will have this effect as well. Building (net) will reduce by $100,000 from 02 January 2018

2) Operating expenses will reduce by $22,00 per year in 2019 due to removal Building assets. This is the annual depreciation for which the building sold (calculated above)

3) Since company sold this building to staffer and not to any of its subsidiaries. Hence neither subsidiaries net assets will be impacted nor company's stakes in the subsidiaries. Hence there will not be any change in Non controlling interest in subsidiaries net income.