Chap006_Day3_class - Chapter 6 Part II p Depreciable...

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Chapter 6 Part II Depreciable Noncurrent Assets ± overview - depreciable non-current assets imination entries ± elimination entries ² downstream sales pstream sales ² upstream sales ± we will work the Ex 6-10 and 11 ± Try P 6-35 yourself before next class 1
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xample - epreciable Property Example Depreciable Property ± parent owns 60% of sub. ± sale of equipment ² proceeds from sale = $90,000 ² original cost = $100,000 ² accum. depr. at time of sale = $40,000 ² riginal life = 10 yrs.; remaining =6yrs. original life 10 yrs.; remaining 6 yrs. ² sold at beginning of year 2
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Subsidiary Parent Transfer price $ 90K Cost $100K 3
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± Recall the purpose of the consolidation entries is to …… 4
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± Recall the purpose of the consolidation entries is to eliminate the impacts of intercompany transactions, since consolidated financial statements are prepared as if intercompany transactions had never occurred. 5
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onsolidation Entries Consolidation Entries nalyze impacts of this intercompany transactions ± Analyze impacts of this intercompany transactions ² Start with journal entries made by both companies ± Reverse changes in the accounts recorded in these journal entries hese reversals are implemented with ± These reversals are implemented with consolidation entries. 6
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Downstream sale, Year of Sale ± Journal entry made by the Parent for the le: sale: ± Journal entry made by the SUB for the yy purchase: 7
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Downstream sale, Year of Sale ± Journal entry made by the Parent for the sale: h 0K Cash 90K Accumulated Depreciation 40K quipment 00K Equipment 100K Gain on sale of equipment 30K ± Journal entry made by the SUB for the purchase: quipment 0K Equipment 90K Cash 90K 8
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± Changes resulted from the intercompany transaction: ² ² ² ± To reverse these changes: 9
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± Changes resulted from the intercompany transaction: ² Gain on sale of equipment by $30K ² Equipment by $10K ² Accumulated depreciation by $40K ± To reverse these changes: quipment 10K Equipment Gain on sale of equipment 30K Accumulated depreciation 40K 10
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This note was uploaded on 05/01/2010 for the course MGMT 503 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Chap006_Day3_class - Chapter 6 Part II p Depreciable...

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