Elimination of each independent intercompany transaction

Assignment Help Financial Accounting

Reference no: EM13718349

Question: Perform the accounting required for the elimination of each independent intercompany transaction:

1. Prepare the book calculations

2. Perform the required journal entries

Assume that Parent Company decides to sell $5,000 of Inventory to Sub for $7,000 cash. Show the sale and the subsequent elimination entries by Parent Company

Parent Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$1,500,000
AR	$10,000
Inventory	$200,000
Land	$640,000
Equipment	$400,000
Accumulated Depreciation	-$150,000

Patent	$0
Total Assets	$2,600,000
AP	$100,000
Common Stock	$450,000
Additional Paid In Capital	$600,000
Retained Earnings	$1,450,000
Total Liabilities & Equity	$2,600,000

Sub Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$35,000
AR	$10,000
Inventory	$65,000
Land	$40,000
PP&E	$400,000
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$400,000
AP	$100,000
Common Stock	$100,000
Additional Paid In Capital	$50,000
Retained Earnings	$150,000
Total Liabilities & Equity	$400,000

Assume that book Value = Fair Value

Sale by Parent
Account	DR	CR






Acquisition by Sub
Account	DR	CR




Elimination Entries
Account	DR	CR

Reference no: EM13718349

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