Chapter 7 Elimination of Unrealized Gains or Losses on Intercompany Sales of Pro
ID: 2560069 • Letter: C
Question
Chapter 7 Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment ny Sale of Equipment Lo@ Lo@ Company owns of the outstanding common stock of Spring Company. On January 1, 2014, Spring Company sold equipment to Pearson Company for $200,000. Spring Company had purchased the equipment for -3 Workpaper Entries-Intercompa Pearson 00 on January 1, 2009 and had depreciated it using a 10% straight-line rate. The management of Pearson remaining useful life of five years on January 1, 2014. In 2015. $300, Company estimated that the equipment had a dent operations (including sales to affiliates) Required: A. Prepare in general journal form the workpaper entries relating to the intercompany sale of equipment that are Company reported $150,000 and Spring Company reported $100,000 in net income from their indepen- necessary in the December 31, 2014, and December 31, 2015, consolidated financial statements workpapers B. Calculate controlling interest in consolidated income for 2015. 7-4 Entries-Intercompany Sale of Land LoG 0 Procter Company owns 90% of the outstanding stock of Silex Company. On January 1, 2014, Silex Company sold land to Procter Company for $350,000. Silex had originally purchased the land on June 30, 2010, for $200,000, Procter Company plans to construct a building on the land bought from Silex in which it wll house new production machinery. The estimated useful life of the building and the new machinery is 15 years. Required: A. Prepare the entries on the books of Procter related to the intercompany sale of land for the years ended December 31, 2014, and December 31, 2015. B. Prepare in general journal form the workpaper entries necessary because of the intercompany (1) The consolidated financial statements workpaper for the year ended December 31, 2014 (2) The consolidated financial statements workpaper for the year ended December 31, 20 15. Upstream and Downstream Sale LO Patterson Company owns 80% of the outstanding common stock of Stevens C costing $500,000 is sold by one affiliate to the other for $800,000. Required: Prepare in general journal form the workpaper entries necessary because of the intercon consolidated financial statements workpaper for the year ended December 31,2014le of land A. Patterson Company purchased the land from Stevens Company B. Stevens Company purchased the land from Patterson Company. 7-5 ompany. On June 30. 2013, land assumingExplanation / Answer
Step 1 - Calculation of gain on sale of equipment
(A) Step 2 - Journal Entry Worksheet
(B) Step 3 - Calculation of Controlling Interest
Particulars Amount Cost of equipment $300000 Accumulated Depreciation ($300000*10%*5years) $150000 Book Value on January 1/1/2014 $150000 Sale Proceeds $200000 Gain on sale of asset $50000