CH6 example - EXAMPLE Assume that P owns 90% of S. On...

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EXAMPLE Assume that P owns 90% of S. On 1/1/x1 S sells equipment to P for $60,000. S had purchased this equipment five years ago at a cost of $80,000. The original estimated life was 10 years. P expects to use the equipment for four more years. S's reported net income in x1, x2, x3 and x4 is $50,000/year. Sale: 1/1/x1 P<--------S Original Cost $80,000 1/1/x1 Acc. Depr. (40,000) 1/1/x1 Bk. Val 40,000 4 10,000 Sales Price 60,000 4 15,000 Gain on Sale 20,000 5,000 Equity method entries Yr x1: Investment in S 45,000 Income from S 45,000 to record S's net income (50,000 x 90%) Equity method entries Yr x2: Investment in S 45,000 Income from S 45,000 to record S's net income (50,000 x 90%) Equity method entries Yr x3: Investment in S 45,000 Income from S 45,000 to record S's net income (50,000 x 90%) Equity method entries Yr x4: Investment in S 45,000 Income from S 45,000 to record S's net income (50,000 x 90%)
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Elimination Entries End of Year 1 Income from S 45,000 Investment in S 45,000 reversal
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CH6 example - EXAMPLE Assume that P owns 90% of S. On...

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