Calculate equity in subsidiary income

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Question - Pale Company owns 90% of the outstanding common stock of Shale Company. On January 1, 2017, Shale Company sold equipment to Pale Company for $300,000. Shale Company had purchased the equipment for $450,000 on January 1, 2006 and has been depreciating it over a 10year life by the straight-line method. The management of Pale Company estimated that the equipment had a remaining life of 5 years on January 1, 2017. In 2017, Pale Company reported$225,000 and Shale Company reported $150,000 in net income from their independent operations.

Required:

a) Prepare in general journal form the work paper entries relating to the intercompany sale of equipment that are necessary in the December 31, 2017 and 2018 consolidated statements work papers. Pale Company uses the cost method to record its investment in Shale Company.

b) Calculate equity in subsidiary income for 2017 and non controlling interest in net income for 2017?

Reference no: EM132037590

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