Reference no: EM132510592

Questions -

1) Paragraph Corporation purchased land on January 1, 20X1, for $20,500. On June 10, 20X4, it sold the land to its subsidiary, Sentence Corporation, for $32,000. Paragraph owns 60 percent of Sentence's voting shares.

a. Prepare the worksheet consolidation entries needed to remove the effects of the intercompany sale of land in preparing the consolidated financial statements for 20X4 and 20X5.

Record the consolidating entry on December 31, 20X4.

Record the consolidating entry on December 31, 20X5.

b. Prepare the worksheet consolidation entries needed on December 31, 20X4 and 20X5, if Sentence had initially purchased the land for $20,500 and then sold it to Paragraph on June 10, 20X4, for $32,000.

Record the consolidating entry on December 31, 20X4.

Record the consolidating entry on December 31, 20X5.

2) Pam Corporation holds 70 percent ownership of Spray Enterprises. On December 31, 20X6, Spray paid Pam $31,000 for a truck that Pam had purchased for $36,000 on January 1, 20X2. The truck was considered to have a 15-year life from January 1, 20X2, and no residual value. Both companies depreciate equipment using the straight-line method.

a. Prepare the worksheet consolidation entry or entries needed on 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.

b. Prepare the worksheet consolidation entry or entries needed on December 31, 20X7, 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.

3) Playoff Corporation holds 90 percent ownership of Series Company. On July 1, 20X3, Playoff sold equipment that it had purchased for $54,000 on January 1, 20X1, to Series for $51,000. The equipment's original six-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment's residual value is considered negligible.

a. Prepare the consolidation entry or entries in the consolidation worksheet prepared as of December 31, 20X3, to remove the effects of the intercompany sale.

Record the entry to eliminate the gain on the equipment and to correct the asset's basis.

Record the entry to adjust Accumulated Depreciation.

b. Prepare the consolidation entry or entries in the consolidation worksheet prepared as of December 31, 20X4, to remove the effects of the intercompany sale.

Record the entry to eliminate the gain on the equipment and to correct the asset's basis.

Record the entry to adjust Accumulated Depreciation.