Business, 13.08.2020 01:01 2016gbryant
Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method
Assume a parent company acquired its subsidiary on January 1, 2009, at a purchase price that was $310,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $210,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $100,000 was assigned to Goodwill. In January of 2012, the wholly owned subsidiary sold Equipment to the parent for a cash price of $122,500. The subsidiary had acquired the equipment at a cost of $140,000 and depreciated the equipment over its 10-year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 4 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6-year useful life. Financial statements of the parent and its subsidiary for the year ended December 31, 2013 follow in part f. below. The parent uses the equity method to account for its Equity Investment. The Customer List was amortized as part of the parent's equity method accounting,
a. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase, and the [I] entries for the year of sale. Note: Round answers to the nearest whole number.
b. Compute the remaining portion of the deferred gain on January 1, 2013.
c. Show the computation to yield the $127,417 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2013.
Answers: 1
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Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method
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