Pale Company owns 90% of the outstanding common stock of Shale Company. On Janua
ID: 2452322 • Letter: P
Question
Pale Company owns 90% of the outstanding common stock of Shale Company. On January 1, 2017, Shale Company sold equipment to Pale Company for $300,000. Shale Company had purchased the equipment for $450,000 on January 1, 2006 and has been depreciating it over a 10 year life by the straight-line method. The management of Pale Company estimated that the equipment had a remaining life of 5 years on January 1, 2017. In 2017, Pale Company reported $225,000 and Shale Company reported $150,000 in net income from their independent operations. Required: a) Prepare in general journal form the workpaper entries relating to the intercompany sale of equipment that are necessary in the December 31, 2017 and 2018 consolidated statements workpapers. Pale Company uses the cost method to record its investment in Shale Company. b) Calculate equity in subsidiary income for 2017 and noncontrolling interest in net income for 2017
Explanation / Answer
Solution:
Journal Entries:
Common Stock 4,05,000
Retained Earnings 45,000
Investment In-Sub Stock 4,50,00
Non-Controlable Interest
Common Stock 2,70,000
Retained Earnings 30,000
Investment In-Sub Stock 3,00,000
Non-Controlable Interest
Particulars Shale Pale Eliminated Entry Debit Eliminated Entry Credit Non-Controling Interest Consolidated Balance Sales 4,50,000 3,00,000 Gain on Sale of Equipment 1,50,000 Depreciation Expencess 45,000 30,000 Other Expencess 1,80,000 2,70,000 Cost of Sale Net Income 2,25,000 1,50,000Related Questions
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