Question

Parent owns 80 Parent-Equipment 65,000; Accumulated depreciation 13,000 Sub-Gain on sale of equipment25,000 What should be reported on the consolidated statements for 2012, with respect to this equipment?

Answer 1

The equipment's book value of $52,000 should be reported on the consolidated financial statements for 2012, and the sub-gain of $25,000 should be eliminated as it is an intercompany transaction.

Step-by-step explanation:

To determine what should be reported on the consolidated statements for 2012 with respect to the equipment, we must first eliminate intercompany transactions. The parent company's original equipment value is $65,000 with accumulated depreciation of $13,000, and a reported sub-gain on sale of equipment is $25,000. Since the gain was recognized on an intercompany transaction,

it would not be reported on the consolidated statements. Instead, the equipment's book value at the time of sale would be used, which is the original cost minus accumulated depreciation ($65,000 - $13,000 = $52,000). Therefore, this equipment's book value of $52,000 should be reported on the consolidated financial statements without the sub-gain of $25,000, which should be eliminated.