Problem: Tribbs has completed the purchase of Quicker. During the previous year, Tribbs sells a wrapping machine to Quicker. The details include the following:
- Tribbs purchased the equipment on 6/30/02 and sold it on 6/30/05.
- Original purchase price is $160,000; depreciation under 7 years in the Modified Accelerated Cost Recovery System (MACRS) is $80,000.
- The sale price to Quicker is $90,000.
- Quicker's profit for the year is $110,000, which includes $1,000 of depreciation from the excess of selling price to Quicker over the original cost of the equipment to Tribbs.
Write a report to Bob including the following information:
- Tribbs' calculation of gain
- To record the transaction:
Tribbs' journal entry
Quicker's journal entry
- Consolidated worksheet entry at 12/31/05