Pam Corporation holds 70 percent ownership of Northern Enterprises. On December 31, 20X6, Northern paid Pam...

4.1 Ratings (767 Votes)

a.
	Date	Account Titles and Explaination	Debit	Credit
		Gain on sale	$ 3,250
		Truck (Bal. Fig.)	$ 5,000
		Accumulated Depreciation		$ 8,250
		(Being elimination of gain on sale and correct basis of asset recorded)

		Workings:
		Purchase price of Truck	=	$ 33,000
	Less:	Accumulated Depreciation for 5 years [($33,000/ 20 years) X 5 years]	=	$ 8,250
		Depreciated value of Truck	=	$ 24,750

		Selling Price	=	$ 28,000
	Less:	Depreciated value of Truck	=	$ 24,750
		Gain on sale	=	$ 3,250

b.
	Date	Account Titles and Explaination	Debit	Credit
		Investment in company	$ 3,250
		Truck	$ 5,000
		Accumulated Depreciation		$8,250
		(Being elimination of gain on sale and correct basis of asset recorded)

		Accumulated Depreciation	$217
		Depreciation Expense		$217
		(Being accumulated depreciation adjusted)

		Workings:
		Accumulated Depreciation	=	$8,250 + [$28,000/(20 years -5 years)] - [($33,000/ 20 years) X 6 years]
			=	$217

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