Stern Manufacturing purchased an ultrasound drilling machine with a remaining 10-year economic life from a 70 percent-owned subsidiary for $360,000 on January 1, 20X6. Both companies use straight-line depreciation. The subsidiary recorded the following entry when it sold the machine to Stern:
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General Journal
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Debit
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Credit
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|
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Cash
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360,000
|
|
|
|
Accumulated Depreciation
|
150,000
|
|
|
|
Equipment
|
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450,000
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|
|
Gain on Sale of Equipment
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|
60,000
|
|
Required:
Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercompany sale of equipment when consolidated financial statements are prepared as of (a) December 31, 20X6, and (b) December 31, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
- Record the entry to eliminate the gain on the equipment and to correct the asset's basis.
- Record the entry to adjust Accumulated Depreciation.
- Record the entry to eliminate the gain on the equipment and to correct the asset's basis.
- Record the entry to adjust Accumulated Depreciation.