Resale of intercompany asset. Hilton Corporation sold a press to its 80%-owned subsidiary, Agri Fab Inc., for $5,000 on January 1, 20X2. The press originally was purchased by Hilton on January 1, 20X1, for $20,000, and $6,000 of depreciation for 20X1 had been recorded. The fair value of the press on January 1, 20X2, was $10,000. Agri Fab pro- ceeded to depreciate the press on a straight-line basis, using a 5-year life and no salvage value. On December 31, 20X3, Agri Fab, having no further need for the machine, sold it for $2,000 and recorded a loss on the sale.
Explain the adjustments that would have to be made to the separate income statements of the two companies to arrive at the consolidated income statements for 20X2 and 20X3.