Sky Corporation owns 75 percent of Earth Company\'s stock. On July 1, 20X8, Sky
ID: 2464503 • Letter: S
Question
Sky Corporation owns 75 percent of Earth Company's stock. On July 1, 20X8, Sky sold a building to Earth for $33,000. Sky had purchased this building on January 1, 20X6, for $36,000. The building's original eight-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment's residual value is considered negligible.
15.
Required information
Based on the information provided, in the preparation of the 20X8 consolidated financial statements, building will be _____ in the eliminating entries.
debited for $33,000
debited for $36,000
credited for $36,000
debited for $3,000
16.
Required information
Based on the information provided, the gain on sale of the building eliminated in the consolidated financial statements for 20X8 is:
$8,250.
$10,500.
$6,000.
$11,250.
17.
Required information
Based on the information provided, in the preparation of the 20X9 consolidated income statement, depreciation expense will be:
debited for $750 in the eliminating entries.
credited for $750 the eliminating entries.
credited for $1500 in the eliminating entries.
debited for $1500 in the eliminating entries.
Explanation / Answer
15 Ans is debited for $3,000
16 Ans is $8,250.
17 Ans is credited for $1500 in the eliminating entries.
Building in books of Sky 36000
After Sale it is debited in books of earth for 33000
And credited in sky books for 36000
For keeping its value intact it will be debited by 3000 in consolidation
Gain on sale: Sale value-(book value-depreciation)
33000-(36000-(4500*2.5)) [36000/8 = 4500]
33000-24750 = 8250
Addl Depreciation = Gain on sale/remaining useful life
= 8250/5.5
= 1500 to be credited in depreciation expenses
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