PROBLEM #3
On January 1, 2017, Bayer Corporation sold to Monsanto Corporation equipment it had purchased for
$225,000 and used for eight years. Bayer recorded a gain of $15,400 on the sale. The equipment has a
total useful life of 15 years, no salvage value, and is depreciated on a straight-line basis. Bayer holds 75
percent of Monsanto's voting common shares.
Required:
a. Prepare the journal entry recorded by Bayer on January 1, 2017 to record the sale of the
equipment
b. Prepare the journal entries recorded by Monsanto to record the purchase of the equipment and
the year end depreciation on the equipment
c. Prepare the consolidation entry or entries related to the intercompany sale of equipment needed
at December 31, 2017, to prepare a full set of consolidated financial statements
d. Prepare the consolidation entry or entries related to the intercompany sale of equipment needed
at December 31, 2018, to prepare a full set of consolidated financial statements