Farm Owns 70% of the Common Shares of XL and Accounts

question 32

Essay

Farm owns 70% of the common shares of XL and accounts for its investment using the cost method.In 20X6,Farm purchased equipment from XL for $300,000.The equipment had been purchased by XL for $420,000 in 20X2,had accumulated depreciation of $168,000 and a six-year remaining life at December 31,20X5.Both companies record a full year of depreciation expense in the year of the purchase and no depreciation in the year of a sale.
Required:
Indicate the consolidation adjustments to the following accounts for the years ended 20X6,20X8 and 20X11:
• depreciation expense
• net book value of equipment
• non-controlling interest on statement of comprehensive income
• non-controlling interest on statement of financial position
• retained earnings,end of year

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the company's books for the next period.

Operating Entity

An organization or firm that engages in commercial, industrial, or professional activities.

Owner's Capital Account

An account on a company's balance sheet representing the total investment made by the owner(s), minus any withdrawals.

Financial Statements

Comprehensive reports that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.