Question

Any difference between implied and book value relates to goodwill. After the acquisition, during 2020, Pioneer sold $100,000 of land to Shipley for cash. The cost of the land was $60,000 at the date of the transfer. Also at January 2, 2020, Pioneer transferred equipment to Shipley for $18,000 cash. The equipment originally cost $20,000 and has a book value of $15,000 (three-year remaining useful life). During 2021, Shipley sold the land to a third-party for $140,000. The equipment continued to be used by Shipley.

Instructions:

A. Prepare the 2020 journal entries only relating to land and equipment transactions.

B. Prepare the 2020 consolidation worksheet entries only relating to the land and equipment transactions.

C. Prepare the 2021 journal entries only relating to land sale and equipment transactions.

D. Prepare the 2021 consolidation worksheet entries only relating to the land and equipment transactions.

Answer 1

Answer and Explanation:

According to the scenario, journal entries of given data are as follow:-

(a). Journal Entries in A/c(2020)

2020  Cash a/c   Dr.  100000

 To Land A/c    60000

 To profit on Sale of Land A/c  40000

               ( Being sale of land is recorded )

2/1/20 Cash A/c   Dr.  18,000

    To Equipment A/c    15,000

 To Profit on Sale of Equipment A/c    3,000

               ( Being sale of an equipment is recorded)

b)  Consolidation Worksheet Entries

2020  Profit on Sale of Land a/c       Dr.     40,000

 To Land A/c        40,000

                ( Being profit on sale of land is recorded)

2020  Profit on Sale of Equipment A/c      Dr.      3,000

          Equipment A/c           Dr.      2,000

   To Accumulated Depreciation A/c          5000

         ( Being profit on sale of equipment is recorded)

2020  Investment in Shipley company A/c     Dr.     1,000

    To Income from Shipley Company A/c        1,000

          ( Being investment in shipley is recorded)

c).   Journal Entries(2021)

2021  Cash A/c    Dr. 1,40,000

          To Land A/c          1,00,000

      To Profit on Sale of Land A/c         40,000

          ( Being sale of land is recorded)

2021  Depreciation A/c      Dr.    6,000

    To Accumulated Depreciation A/c         6,000

            (  Being depreciation is recorded)    

d).                   Consolidation Worksheet Entries(2021)

2021  Income from Shipley Company A/c  Dr. 40,000

   To Profit on Sale of Land A/c    40,000

              ( Being income in Shipley is recorded)

2021  Investment in Shipley Company A/c  Dr.  1,000

    To Income from Shipley Company A/c             1,000

            ( Being investment in Shipley is recorded)