Reference no: EM132841117

Parent Company acquired 80 percent of Sub Company's stock on January 1, 2017. The following transactions occurred between Parent Company and Sub Company in 2018 and 2019:

• Sub Co. sold equipment to Parent Co. for $136,000 on January 1, 2018. Sub Co. had originally purchased the equipment for $160,000 on January 1, 2015. At the time of the original purchase on January 1, 2015, Sub Co. estimated that the equipment had a ten-year remaining useful life with no residual value.
• Parent Co. sold land costing $90,000 to Sub Co. on January 1, 2019, for $110,000. Sub sold the land to an outside party on March 29, 2020 for $140,000.

Required

Problem 1: Provide the equity method entry that Parent prepares in 2019 in connection with the equipment transaction.

Problem 2: Give the consolidation entry or entries (if any) required to eliminate the effects of the intercompany sale of equipment in preparing consolidated financial statements at December 31, 2019.

Problem 3: Give the consolidation entry or entries (if any) required to eliminate the effects of the intercompany sale of land in preparing consolidated financial statements at December 31, 2019 and December 31, 2020.