The following information relates to equipment sales between a parent and its subsidiary.
•At the beginning of 2019, the parent sold equipment with a 5-year remaining life and a book value of $100,000 to the subsidiary for $70,000. The subsidiary sold the equipment to an outside company at the beginning of 2021, for $110,000.
•At the beginning of 2019, the subsidiary sold equipment with a 20-year remaining life to its parent at a gain of $40,000. At the end of 2021, the parent sold the equipment to an outside company at a gain of $50,000.
•At the beginning of 2019, the parent sold equipment with a 4-year remaining life at a loss of $20,000 to the subsidiary. The subsidiary sold the equipment at a gain of $2,000 at the beginning of 2020.
•At the beginning of 2018, the subsidiary sold equipment with a 7-year remaining life to its parent at a gain of $7,000. The parent still holds the equipment at the end of 2021.
•At the beginning of 2019, the parent sold equipment with a 25-year remaining life to its subsidiary at a gain of $75,000. The parent still holds the equipment at the end of 2021.
Required
Prepare the eliminating entries (I) for the 2021 consolidation working paper for the above intercompany transactions. Use a net book value account for the equipment (do not separate out the original cost and accumulated depreciation accounts).

Question

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The Answer of The following information relates to equipment sales between a parent and its subsidiary.
•At the beginning of 2019, the parent sold equipment with a 5-year remaining life and a book value of $100,000 to the subsidiary for $70,000. The subsidiary sold the equipment to an outside company at the beginning of 2021, for $110,000.
•At the beginning of 2019, the subsidiary sold equipment with a 20-year remaining life to its parent at a gain of $40,000. At the end of 2021, the parent sold the equipment to an outside company at a gain of $50,000.
•At the beginning of 2019, the parent sold equipment with a 4-year remaining life at a loss of $20,000 to the subsidiary. The subsidiary sold the equipment at a gain of $2,000 at the beginning of 2020.
•At the beginning of 2018, the subsidiary sold equipment with a 7-year remaining life to its parent at a gain of $7,000. The parent still holds the equipment at the end of 2021.
•At the beginning of 2019, the parent sold equipment with a 25-year remaining life to its subsidiary at a gain of $75,000. The parent still holds the equipment at the end of 2021.
Required
Prepare the eliminating entries (I) for the 2021 consolidation working paper for the above intercompany transactions. Use a net book value account for the equipment (do not separate out the original cost and accumulated depreciation accounts).

The Following Information Relates to Equipment Sales Between a Parent