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  3. assume that on january 1,2011, a wholly owned subs

Assume that on January 1,2011, a wholly owned subsidiary sells to its parent, for a...

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Accounting

Assume that on January 1,2011, a wholly owned subsidiary sells to its parent, for a sale price of $129,000, equipment that originally cost $152,000. The subsidiary originally purchased the equipment on January 1,2007, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the full equity method to account for its Equity Investment.
a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale).
Annual depreciation expense-subsidiary Answer 1
Annual depreciation expense-parent Answer 2
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.

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