Answer:
See the explanation below
Explanation:
Net book value (NBV)) = $120,000 - $48,000 = $72,000
Unrealized profit on sales of equipment = Selling price - NBV = $84,000 - $72,000 = $12,000
Annual depreciation = $120,000/10 = $12,000
Overcharged depreciation included = $12,000 * 10% = $1,200
Consolidation entries in 2012:
<u>Details Dr ($) Cr ($) </u>
Depreciation expenses 1,200
Reserve account 10,800
Equipment 12,000
<u><em>Being the unrealized profit on equipment </em></u>
Accumulated depreciation 12,000
Depreciation expenses 12,000
<em><u>Being the depreciation charge for the year 2012 </u></em>
Consolidation entries in 2013:
<u>Details Dr ($) Cr ($) </u>
Accumulated depreciation 12,000
Depreciation expenses 12,000
<em><u>Being the depreciation charge for the year 2013 </u></em>