Fred Corporation owns 75 percent of Winner Company's voting shares, acquired on March 21, 20X5, at...

60.1K

Verified Solution

Question

Accounting

Fred Corporation owns 75 percent of Winner Company's votingshares, acquired on March 21, 20X5, at book value. At that date,the fair value of the noncontrolling interest was equal to 25percent of the book value of Winner Company. On January 1, 20X4,Fred paid $150,000 for equipment with a 10-year expected totaleconomic life. The equipment was depreciated on a straight-linebasis with no residual value. Winner purchased the equipment fromFred on December 31, 20X6, for $140,000. Winner sold land it hadpurchased for $75,000 on February 18, 20X4, to Fred for $60,000 onOctober 10, 20X7. Required: Prepare the elimination entries for20X8 related to the sale of depreciable assets and land.
Correct Answer:
DRAccumulated Depreciation 5,000
CRDepreciation Expense 5,000
DRInvestment in Summit 30,000
DRBuildings and Equipment 10,000
CRAccumulated Depreciation 40,000
For building,
If we are looking at 2008, why investment 30, bldg 10 and A/d40? Did we not record an entry in 2007? Should it not be Investment25K, Equipment 10K, and A/D 35K? It is posted as the correctsolution, but can someone explain why?

Answer & Explanation Solved by verified expert

3.7 Ratings (586 Votes)

Equipment Book Value 150000 Accumulated Depreciation 30000 Sold to Winner at 140000 Profit on sale of equipment 20000 In the books of FRED Cash debit 140000 Accumulated depreciation 30000 Equipment credit 150000 Gain on sale of equipment See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Fred Corporation owns 75 percent of Winner Company's votingshares, acquired on March 21, 20X5, at book value. At that date,the fair value of the noncontrolling interest was equal to 25percent of the book value of Winner Company. On January 1, 20X4,Fred paid $150,000 for equipment with a 10-year expected totaleconomic life. The equipment was depreciated on a straight-linebasis with no residual value. Winner purchased the equipment fromFred on December 31, 20X6, for $140,000. Winner sold land it hadpurchased for $75,000 on February 18, 20X4, to Fred for $60,000 onOctober 10, 20X7. Required: Prepare the elimination entries for20X8 related to the sale of depreciable assets and land.Correct Answer:DRAccumulated Depreciation 5,000CRDepreciation Expense 5,000DRInvestment in Summit 30,000DRBuildings and Equipment 10,000CRAccumulated Depreciation 40,000For building,If we are looking at 2008, why investment 30, bldg 10 and A/d40? Did we not record an entry in 2007? Should it not be Investment25K, Equipment 10K, and A/D 35K? It is posted as the correctsolution, but can someone explain why?