Preparing the [I] consolidation entries for sale of depreciableassets-Equity method
Assume on Jan. 1, 2016, a parent sells to its wholly ownedsubsidiary, for a sale price of $162,000, equipment that originallycost $184,000. The parent originally purchased the equipment onJanuary 1, 2012 and depreciated the equipment assuming a 10 yearuseful life ( straight- line with no salvage value). The subsidiaryhas adopted the parent's depreciation policy and depreciated theequipment over the remaining useful life of 6 years. The parentuses the equity method to account for its equity Investment.
A.) Compute the annual pre-consolidation depreciation expensefor subsidiary (post-intercompany sale) and the parent(pre-intercompany sale)
B.) Compute the pre-consolidation Gain on Sale recognized by theparent during 2016.
C.) Prepare the required [I] consolidation entry in 2016 (assumea full year of depreciation)
D.) Prepare the required [I] consolidation entry in 2019(assuming the subsidiary is still holding the equipment)
E.) How long must we continue to make the [I} consolidationentries
