2010-11-05_165220_e7-3

2010-11-05_165220_e7-3 - ststements workpapers. b....

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Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. Exercise 7-3 workpaper Entries—Intercompany Sale of Equipment LO6 LO8 Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2011, Spring Company sold equipment to Pearson Company for $200,000. Spring Company had purchased the equipment for $300,000 on January 1, 2006, and had depreciated it using it using 10% straight-line rate. The management of Pearson Company estimated that the equipment had a remaining useful life of five years on January 1, 2011. In 2012, Pearson Company reported $150,000 and Spring Company reported $100,000 in net income from their independent operations (including sales to affiliates). a. Prepare a general journal the workpaper entries relating to the intercompany sale of equipment that are necessary in the December 31, 2011, and December 31, 2012, consolidated financial
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Unformatted text preview: ststements workpapers. b. Calculate controlling interest in consolidated income for 2012. Cost of equipment $ 300,000 Accumulated Depreciation ($300,000 .10 5 years) 150,000 Book value 1/1 2011 150,000 Proceeds from sale 200,000 Gain on sale $ 50,000 Part A 2011 (1) Equipment ($300,000 - $200,000) 100,000 Gain on Sale of Equipment 50,000 Accumulated Depreciation($300,000)(5/10) 150,000 (2) Accumulated Depreciation Equipment 10,000 Depreciation Expense ($50,000/5) 10,000 2012 (1) Equipment 100,000 Beginning Retained Earnings Pearson (.9 $50,000) 45,000 Noncontrolling Interest (.1 $50,000) 5,000 Accumulated Depreciation Equipment 150,000 (2) Accumulated Depreciation Equipment 20,000 Depreciation Expense 10,000 Beginning Retained Earnings Pearson (.9 $10,000) 9,000 Noncontrolling Interest (.10 $10,000) 1,000 Part B Controlling interest in Consolidated Net Income for 2012 = $150,000 + . 9($100,000 + $10,000) = $249,000...
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This note was uploaded on 01/10/2012 for the course ACC 499 taught by Professor M.pedergrass during the Spring '10 term at Strayer.

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2010-11-05_165220_e7-3 - ststements workpapers. b....

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