Answer:
truck 5,000 debit
gain on sale 7,000 debit
accumulated depreciation 12,000 debit
Explanation:
The company will have to adjust to re-enter the truck into the accounting like ifthe sale did not occur.
Thus, as the truck enter Pam for 36,000 and his subsidiary by 31,000
the 5,000 difference must be reversed.
we also have to redo the accumulated depreciation:
36,000 dollar / 15 years = 2,400
from 2002 to 2006 we have 12,000 accumualted depreciation
Last, we have to remove the sain recognized in this gain which is the difference betwene the depreication write-off and the truck price variation.
Worksheet consolidation entries needed on December 31, 20X6, to remove the effects of the intercompany sale.
Date General Journal Debit Credit
December 31, 20X6. Truck $5,000
Gain in sale of equipment
(Bal. Fig.) $7,000
Accumulated depreciation $12,000
- Equipment
We need to compute the value of accumulated depreciation.
Accumulated depreciation = (Original cost / Useful life) * Years until sale
Original cost = $36,000
Useful life = 15 years
Years until sale = 5 (20X2 - 20X6)
Therefore,
Accumulated depreciation = ($36,000 / 15) * 5
Accumulated depreciation = $2,400 * 5
Accumulated depreciation = $12,000
From the above, the value of $5,000 ($36,000 - $31,000) would have to be reversed because it is the netbook value of cost of asset and sales.
