Question

I need all depreciation expense answers in part b (specifically for consolidated balance). Thanks!

Upstream Intercompany Building Transactions

Shiek Shoes sold an administrative building to its parent, Pearl Industries, on January 1, 2018, for $8,000,000. At the time of sale, the building was carried on Shiek’s books at original cost of $10,000,000, with $8,500,000 of accumulated depreciation. At the date of sale, the building had a remaining life of 20 years, and straight-line depreciation is appropriate. It is now December 31, 2020, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Pearl still owns the building.

Required

a. Prepare the required eliminating entries for this intercompany building sale for the December 31, 2020, consolidation working paper.

Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).

Description		Debit	Credit
Answer

		Answer	Answer
Accumulated depreciation		Answer	Answer
Answer

		Answer	Answer
To eliminate the beginning-of-year unconfirmed gain.
Answer

		Answer	Answer
Answer

		Answer	Answer
To adjust depreciation expense.
Answer

		Answer	Answer
Answer

		Answer	Answer
To restate the accounts to their original acquisition cost basis.

b. What balances does Pearl report in its own trial balance for this building at December 31, 2020?

• Use negative signs with answers to indicate a Credit (Cr) balance.
• Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).

Account		Amount Dr (Cr)
Building, original cost		Answer
Accumulated depreciation		Answer
Depreciaiton expense		Answer

Consider these balances: building, original cost; accumulated depreciation, building; depreciation expense, building. What balances should be reported on the consolidated trial balance?

• Use negative signs with answers to indicate a Credit (Cr) balance.
• Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).

Account		Amount Dr (Cr)
Building, original cost		Answer
Accumulated depreciation		Answer
Depreciation expense		Answer

Show how the eliminating entries in part a adjust Pearl’s book balances to the correct consolidated balances.

• Enter Debit and Credit answers in order as the journal entries appear in part a.
• Use negative signs in the "Dr (Cr)" columns to indicate a credit balance (not in the "Credit" column).
• Enter numerical answers using all zeros (do not abbreviate answers to millions or thousands).

Account		Pearl Dr (Cr)	Debit	Credit	Consolidated Balances Dr (Cr)
Building, original cost		Answer	Answer	Answer	Answer
Accumulated depreciation		Answer	Answer	Answer	Answer
			Answer
Depreciation expense		Answer		Answer	Answer

Answer 1