Assignment Option: Intercompany Transactions - Equipment
Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the elimination of each independent intercompany transaction:
Prepare the book calculations
Perform the required journal entries
|
Assume that Parent Company decides to sell Equipment (Cost = $10,000, Accumlated Depreciation = $1,000) to Sub for $20,000 cash. Show the sale and the subsequent elimination entries by Parent Company
|
|
Parent Company Balance Sheet
|
|
Sale by Parent
|
|
Assets, Liabilities & Equities
|
Book Value
|
|
Account
|
DR
|
CR
|
|
Cash
|
$1,500,000
|
|
|
|
|
|
AR
|
$10,000
|
|
|
|
|
|
Inventory
|
$200,000
|
|
|
|
|
|
Land
|
$640,000
|
|
|
|
|
|
Equipment
|
$400,000
|
|
|
|
|
|
Accumulated Depreciation
|
-$150,000
|
|
|
|
|
|
|
|
|
Acquisition by Sub
|
|
Patent
|
$0
|
|
Account
|
DR
|
CR
|
|
Total Assets
|
$2,600,000
|
|
|
|
|
|
AP
|
$100,000
|
|
|
|
|
|
Common Stock
|
$450,000
|
|
|
|
|
|
Additional Paid In Capital
|
$600,000
|
|
|
|
|
|
Retained Earnings
|
$1,450,000
|
|
Elimination Entries by Parent
|
|
Total Liabilities & Equity
|
$2,600,000
|
|
Account
|
DR
|
CR
|
|
|
|
|
|
|
|
Sub Company Balance Sheet
|
|
|
|
|
|
Assets, Liabilities & Equities
|
Book Value
|
|
|
|
|
|
Cash
|
$35,000
|
|
|
|
|
|
AR
|
$10,000
|
|
|
|
|
|
Inventory
|
$65,000
|
|
|
|
|
|
Land
|
$40,000
|
|
|
|
|
|
PP&E
|
$400,000
|
|
|
|
|
|
Accumulated Depreciation
|
-$150,000
|
|
|
|
|
|
Patent
|
$0
|
|
|
|
|
|
Total Assets
|
$400,000
|
|
|
|
|
|
AP
|
$100,000
|
|
|
|
|
|
Common Stock
|
$100,000
|
|
|
|
|
|
Additional Paid In Capital
|
$50,000
|
|
|
|
|
|
Retained Earnings
|
$150,000
|
|
|
|
|
|
Total Liabilities & Equity
|
$400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Assume that book Value = Fair Value
|
|
|
|
|