P Company owns 65% of the outstanding common stock of S Company. On September 30, 2011, S Company sold equipment to P Company for $550,000.

P Company owns 65% of the outstanding common stock of S Company. On September 30, 2011, S Company sold equipment to P Company for $550,000. The equipment cost S Company $720,000 and had accumulated depreciation of $480,000 on the date of the sale. The management of P Company estimated that the equipment had a remaining useful life of four years from September 30, 2011. S also estimated the same useful life left at time of sale of equip,ent.

To solve: Prepare all journal entries for P and S (from initial purchase of equipment from 3rd parties, depreciation from initial purchase to sale between the related parties) on Sep. 30, 2011. In addition, prepare the w/p entry to eliminate the intercompany sale of equipment as of Sep. 30, 2011. Finally, prepare the adjustment to depreciation on Dec. 31, 2011.