Reference no: EM133091079

Question - Photo Industries has owned 80 percent of Shutter Corporation for many years. On January 1, 20X6, Photo paid Shutter $270,000 to acquire equipment that Shutter had purchased on January 1, 20X3, for $300,000. The equipment is expected to have no scrap value and is depreciated over a 15-year useful life.

Photo reported operating earnings of $100,000 for 20X8 and paid dividends of $40,000. Shutter reported net income of $40,000 and paid dividends of $20,000 in 20X8.

Required -

a. Compute the amount reported as consolidated net income for 20X8.

b. Prepare the consolidation entry or entries required to eliminate the effects of the intercompany sale of equipment in preparing a full set of consolidated financial statements at December 31, 20X8.

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

d. Record the entry to adjust Accumulated Depreciation.