Assume equipment was purchased by Pet Food Manufacturing on January 1, 2016, for $10,000 . This equipment uses the straight-line depreciation method and has a 5 year useful life with no salvage value

The equipment is sold to Carter Foods on December 31, 2019 for $4,000 . Pet Food Manufacturing records its 2019 expense prior to the sale.

Required:
a. What are the journal entries that Pet Food Manufacturing and Carter Foods make at the date of the intercompany sale of the equipment?
b. What is the worksheet elimination in journal entry format?

Journal Entry – Pet Food Manufacturing
Cash 4,000
Accumulated Depreciation 8,000
Gain on Sale of Equipment 2,000
Equipment 10,000
(To record the sale of equipment to Carter Foods)

Journal Entry – Carter Foods

Equipment 4,000
Cash 4,000
(To record purchase of equipment from Pet Food Manufacturing)

b.
Equipment 6,000
Gain on Sale of Equipment 2,000
Accumulated Depreciation 8,000
(Worksheet Elimination – Journal Entry Form)