Part III. Intercompany Fixed Assets
Perfect company acquired 80% of the outstanding common stock of Slippery Company on January 1, 2014. On the date of acquisition, all assets and liabilities had book values equal to their fair values, and there was no goodwill or bargain purchase implid by the acquisition of Slippery Company. Since acquiring Slippery, Perfect has used the full equity method to account for its investment.
On January 1, 2015 Perfect Company sold Sto Slippery Company equipment having a cost of $40,000 and a book value of $20,000. Slippery paid Perfect $30,000. The estimated remaining useful life of the equipment at the date of transfer was eight years. Straight-line depreciation is used by both companies with no salvage value expected.
Required:
Prepare ALL necessary workpaper elimination entries related to the intercompany sale of equipment to prepare consolidated financial statements for 2015 and 2016.
2015 workpaper elimination entries
2016 workpaper elimination entries