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On January 1, 20X7, Wainwrite Corporation sold to Lance Corporation equipment it had purchased for $135,000...

On January 1, 20X7, Wainwrite Corporation sold to Lance Corporation equipment it had purchased for $135,000 and used for eight years. Wainwrite recorded a gain of $22,400 on the sale. The equipment has a total useful life of 15 years and is depreciated on a straight-line basis. Wainwrite holds 65 percent of Lance’s voting common shares.

  

Required:
a.

Prepare the journal entry made by Wainwrite on January 1, 20X7, to record the sale of equipment.

1. Record the gain on Equipment.
b.

Prepare the journal entries recorded by Lance during 20X7 to record the purchase of equipment and year-end depreciation expense.

1. Record purchase of equipment.

2. Record Depreciation Expense entry.
c.

Prepare the elimination entry or entries related to the intercompany sale of equipment needed at December 31, 20X7, to prepare a full set of consolidated financial statements.

1. Record the entry to eliminate gain on equipment and to correct asset's basis.

2. Record entry to adjust Accumulated Depreciation.
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