Frazer corporation purchased 60 percent

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Reference no: EM131032141

Frazer Corporation purchased 60 percent of Minnow Corporation's voting common stock on January 1, 20X1, at underlying book value. On January 1, 20X5, Frazer received $210,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $300,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis.

Required

a. Give the workpaper eliminating entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale.

b. Give the workpaper eliminating entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale.

ANSWER TO B

	Truck		Accumulated Depreciation
Minnow Corp.	210,000	Actual		35,000
	90,000		5,000	120,000
Frazer Corp.	300,000	"As If"		150,000

Eliminate the Gain on Truck and Correct Asset's Basis:
Investment in Minnow Corp.	30,000
Truck	90,000
Accumulated Depreciation		120,000
Accumulated Depreciation	5,000
Depreciation Expense		5,000

MY QUESTION IS JUST HOW IS THE 5,000 CALCULATED FOR THE ACCUMULATED DEPRECIATION??????????????

Reference no: EM131032141

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