PLEASE ONLY ANSWER FULL QUESTION. THANKS. Frazer Corporation purchased 60 percen
ID: 2488580 • Letter: P
Question
PLEASE ONLY ANSWER FULL QUESTION. THANKS.
Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On January 1, 20X5, Frazer received $225,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $295,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis.
a. Prepare the worksheet consolidation entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale:
Record the entry to eliminate the gain on the truck and to correct the asset's basis.
Record the entry to adjust Accumulated Depreciation.
b. Prepare the worksheet consolidation entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale.:
Record the entry to eliminate the gain on the truck and to correct the asset's basis.
Record the entry to adjust Accumulated Depreciation.
Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Dec 31 Gain on Sale of truck Dr. 18500 2015 Truck Dr. 70000 To depreciation Expense 85857 To Accumulated Dep. 2643 Accumulated Dep. Adjustment. Required (295000 / 10 Years) X 4 Years 118,000 Reported (225000 /7 Years) X 1 Years (32,143) Required Increase 85,857 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Dec 31 Retained Earnings, Jan 1 Dr. 15857 2016 Truck Dr. 70000 To depreciation Expense 2643 To Accumulated Dep. 83214 Accumulated Dep. Adjustment. Required (295000 / 10 Years) X 5 Years 147,500 Reported (225000 /7 Years) X 2 Years (64,286) Required Increase 83,214
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