Several Years Ago,Pilot International Purchased 70% of the Outstanding Stock

question 26

Essay

Several years ago,Pilot International purchased 70% of the outstanding stock of Skyway Incorporated,at a time when Skyway's book values were equal to its fair values.On January 1,2011 Skyway purchased a truck for $80,000 which had no salvage value with a useful life of 8 years,depreciated on a straight-line basis.On January 1,2014,Skyway sold the truck to Pilot Corporation for $28,000.The truck was estimated to have a five-year remaining life on this date,and no salvage value.All affiliates use the straight-line depreciation method.
Required:
Prepare all relevant entries with respect to the truck.
1.Record the journal entries on Pilot's books for 2014.
2.Record the journal entries on Skyway's books for 2014.
3.Prepare the consolidation entries required for Pilot and subsidiary for 2014 as a result of this transaction.

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Definitions:

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid by the company.

Adjust Account Balances

The process of updating ledger accounts at the end of a period to reflect accurate financial information for reporting.

Balance Sheet

A financial statement that displays a company's financial position at a specific point in time, showing assets, liabilities, and shareholders' equity.

Revenues

The total income generated by a company from its business activities, such as the sale of goods or services, before any expenses are subtracted.