Accounting homework help. On January 1, 2002 Potter Company purchased all of the

Question

Accounting homework help.

On January 1, 2002 Potter Company purchased all of the stock in Voldomort Company at book value. Potter accounts for this investment using the initial value method and Voldomort Company does not pay any dividends. On January 1, 2010 Potter purchased a truck for $130,000. The truck is expected to last 10 years and have no salvage. Potter uses straight line depreciation. On January 1, 2014 Potter sold the truck to Voldomort for $78,000. Voldomort believes the truck will last 6 years and with no salvage Voldomort purchased the truck for cash The 2014 income statements of Potter and Voldomort are Potter Voldomort 300,000 60000 revenue depreciation expense gain/loss on sale truck 0 ncome A) MAKE THE ENTRY POTTER MAKES WHEN IT SELLS THE TRUCK TO VOLDOMORT B) DETERMINE VOLDOMORTS DEPRECIATION EXPENSE IN 2014 C) DETERMINE CONSOLIDATED INCOME FOR 2014 D) MAKE THE NECESSARY WORKSHEET ENTRIES NEEDED IN CONNECTION WITH THIS TRUCK IN 2014 REQUIRED On January 1, 2017 Voldomort sold the truck to Weasley Company for $32000 Potter Voldomort 300,000 0 revenue 60000 gain/loss on sale truck income

Explanation / Answer

1st january 2010 purchase the aAsset Cost of the Asset 130000 life the asset 10 Depreciation for year 2010 13000 Depreciation for year 2011 13000 Depreciation for year 2012 13000 Depreciation for year 2013 13000 Asset value as on 1st january 2014 (130000-13000*4) 78000 Make the entry Cash 78000       Asset 78000 Net gain or loss Written down value 78000 sale value 78000 Net gain or loss 0 b) Depreciation Asset value 78000 life of the asset 6 Depreciation 13000 C)Consolidated income Revenue of potter 300000 Revenue of voldomart 60000 Depreciation 13000 Gain or loss on sale of trruck 0 Net income 347000 D)Make the entry Asset 78000              cash 78000 2 voldamart sold the asset to wealsy Cost of the asset on 1at january 2014 78000 life 6 Dep for 2014 13000 Dep for 2015 13000 Dep for 2016 13000 Written down value as on 1st january 2017 39000 Sale value 32000 Loss on sale of asset -7000 a)Cash 32000 Loss on the sale of asset 7000          Asset 39000 b)Consolidated income Revenue of potter 300000 Revenue of voldomart 60000 Depreciation 0 Gain or loss on sale of trruck -7000 Net income 353000 c)Cash 32000 Loss on the sale of asset 7000          Asset 39000

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