Question

Fred Corporation owns 75 percent of Winner Company's voting shares, acquired on March 21, 20X5, at book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Winner Company. Winner Fred Corporation Co Cash and Receivables Inventory Land Buildings and Equipment Investment in Winner Company Stock $70,000 $10,000 20,000 45,000 250,000 150,000 46,250 140,000 93,750 Debits $600,000 $225,000 Accun Depreciation Accounts Payable Notes Payable Common Stock Retained Eamings $100,000 $42,500 12,500 45,000 100,000 100,000 25,000 30,000 70,000 300,000 Credits 600,000$225,000 On January 1, 20X4, Fred paid $150,000 for equipment with a 10-year expected total economic life. The equipment was depreciated on a straight-line basis with no residual value. Winner purchased the equipment from Fred on December 31, 20x6, for $140,000. Winner sold land it had purchased for $75,000 on February 18, 20X4, to Fred for $60,000 on October 10, 20X7 Required: Prepare the elimination entries for 20X8 related to the sale of depreciable assets and land if Fred uses the equity method to account for its investment in Winner.

Answer 1

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