and no salvage value Both companies depreciate trucks on a s

and no salvage value. Both companies depreciate trucks on a straight-li Required a. Give the worksheet consolidation entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale. h. Give the worksheet consolidation entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale. Sale of Equipment to Subsidiary in Current Period On January 1, 20X7, Wainwrite Corporation sold to Lance Corporation equipment it had pur- chased for $150,000 and used for eight years. Wainwrite recorded a gain of $14,000 on the sale. The equipment has a total useful life of 15 years and is depreciated on a straight-line basis. Wain- write holds 70 percent of Lance\'s voting common shares explaun each ste Required a. Give the journal entry made by Wainwrite on January 1, 20X7, to record the sale of equipment. h. Give the journal entries recorded by Lance during 20X7 to record the purchase of equipment and year-end depreciation expense. December 31, 20X7, to prepare a full set of consolidated financial statements. prepare a consolidated balance sheet only. sale of equipment needed at c. Give the consolidation entry or entries related to the intercompany d. Give the consolidation entry or entries related to the equipment required at January 1, 20X8, to Upstream Sale of Equipment in Prior Period Baywatch Industries has owned 80 percent of Tubberware Corporation for many years. On January nqire equinment that Tubberware had pur-

Solution

Jan 1st 20X7 WC co sold machinery to LC co. WC co. holds 70% of LC co. So, WC co. is the holding company Cost of machinery (original cost) 150000 life of machine 15 years Depreciation (SLM) 10000 Per year Total depreciation for 8 years 80000 Book value on the date of sale 70000 Add : Profit on sale 14000 Sale consideration 84000 The profit on sale ( i.e. 14000) is not considered for the 70% holding Only 30% share of minority is shown in consolidated balance sheet 14000*0.3 4200 Journal entries (A) Debit Bank Account 84000 Credit Profit and loss account 14000 Credit Machinery Account 70000 ( being machinery sold recorded in WC co) (B) Debit Machinery Account 84000 Credit Bank Account 84000 (Being machinery purchased by LC co.) Debit Deprciation Account 10000 Credit Machinery Account 10000 ( being depreciation charged by LC Co) © Debit Profit and loss account 9800 Credit Machinery Account 9800 (being elimination of Holding company profit) (D) Consolidated Balance sheet of WC co. and its subsidiary LC as on 31st Dec 20X1 Equity and Liability: Reserves and Surplus Minority interest 4200 Asset Tangib;e Fixed asset 74200