Ten years later, Belzer is still using the equipment. In preparing its consolidated financial statements, Belzer should credit the equipment account by $35,000. What account(s) should be debited in this journal entry?

A) Opening consolidated retained earnings by $35,000
B) Opening consolidated retained earnings by $24,500 and NCI by $10,500
C) Depreciation expense by $35,000
D) Accumulated depreciation by $35,000

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Sarmiento Maria · Accepted Answer

Final Answer : D, Explanation :  When a piece of equipment is sold between a parent company and its subsidiary, any gains or losses are eliminated in the preparation of consolidated financial statements to avoid double counting. In this case, since Sabo Ltd. sold the equipment to Belzer Co. for a gain of $35,000, this gain should be eliminated by debiting accumulated depreciation (since the equipment has been in use for 10 years) for $35,000 and crediting the equipment account for the same amount. Therefore, the correct answer is D, accumulated depreciation by $35,000.

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