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.
What will be an ideal response?

Requirement 1: Pilot's books
01/01/14 Truck 28,000
Cash 28,000

12/31/14 Depreciation expense 5,600
Accumulated depreciation 5,600

Requirement 2: Skyway's books
01/01/14 Cash 28,000
Accumulated depreciation 30,000
Loss on sale of truck 22,000
Truck 80,000

Requirement 3: Consolidation entries
12/31/14 Truck 22,000
Loss on sale of truck 22,000

Depreciation expense 4,400
Accumulated depreciation 4,400
(22,000/5 = 4,400 )