ADVANCED ACCOUNTING 2

Chapter 6
Intercompany Profit Transactions - PPE

Sources: “Advanced Accounting” by Beams, Anthony, Bettinghaus, and smith and

“Advanced Accounting” by Jeter

Prepared by: Hanna Wijaya, SE., MM.

 Intercompany Profit – PPE
Laba atau rugi yang belum direalisasi atas aset tetap akan
mempengaruhi laporan keuangan sampai aset tersebut dijual
kepada pihak di luar entitas yang berafiliasi atau habis
terpakai oleh afiliasi pembeli.
Transaksi ini dibedakan menjadi:
 Depreciable Assets
 Hapus laba atau rugi atas penjualan aset tetap yang seharusnya tidak tampak
dalam laporan laba rugi konsolidasi.
 Mengurangi/menambah beban penyusutan dan akumulasi penyusutan
sebagai penyesuaian karena dasar penyusutan aset tetap dikurangi/ditambah
 Co : kendaraan,
 Non Depreciable Assets (HANYA TANAH)
 Hapus laba atau rugi atas penjualan aset tetap yang seharusnya tidak tampak
dalam laporan laba rugi konsolidasi.
 Mengembalikan aset tetap terkait pada harga perolehannya (cost).
 Penerapan metode ekuitas

PSAK 15 (Amandemen 2015)

Investasi pada Entitas Asosiasi mengadopsi IAS 28:
Investment in Associates

Penerapan metode konsolidasi digunakan dalam metode

ekuitas untuk transaksi antar investor dan investee
Laba rugi rugi transaksi hulu (upstream) atau hilir
(downstream) hanya diakui sebesar bagian dari investor lain
dalam entitas asosiasi.
Laba rugi entitas asosiasi dari transaksi tersebut
dieliminasi
Pengaruh Profit terhadap Income From Subsidiary

Diakui
100%
Pengaruh Profit terhadap Income From Subsidiary

Diakui
sebesar
%
Parent
 Elimination Journal Entries
NON DEPRECIABLE ASSETS

1. Eliminasi unrealized intercompany profit/loss (tahun penjualan).

2. Eliminasi unrealized intercompany profit/loss (tahun berikutnya jika belum
dijual ke pihak lain).
3. Eliminasi realized intercompany profit/loss (saat dijual ke pihak lain).
Interco. Elim 1 Elim 2 (blm dijual) Elim 3 (sudah dijual)
Profit
DOWNSTREAM Gain on sale of land XX Investment in Subs. XX Investment in Subs XX
Land XX Land XX Gain on sale of land XX
UPSTREAM Gain on sale of land XX Investment in Subs. XX Investment in Subs XX
Land XX NCI XX NCI XX
Land XX Gain on sale of land XX

Interco. Loss Elim 1 Elim 2 Elim 3

DOWNSTREAM Land XX Land XX Loss on sale of Land XX

Loss on sale of Land XX Investment in Subs. XX Investment in Subs XX
UPSTREAM Land XX Land XX Loss on sale of Land XX
Loss on sale of Land XX Investment in Subs. XX Investment in Subs XX
NCI XX NCI XX
 Review Intermediate 1
Non-Depreciable Assets
 Purchased a Land for $40,000 cash:
Dr. Land 40,000
Cr. Cash 40,000

 There’s no depreciation expense to be adjusted. Remember, land is the

non depreciable assets! We never depreciate land.

 Sold the Land for $50,000.

Dr. Cash 50,000
Cr. Land 40,000
Cr. Gain on sale 10,000
 Downstream Sale of Land
Non Depreciable Assets

 San Co. is 90% owned subsidiary of Pak Co, acquired for

$270,000 on Jan 1’11. Investment cost was equal to BV and
FV of the interest acquired.
 San’s net income for 2011 was $70,000.
 Pak’s net income (excluding its income from San) was $90,000.
 Pak’s net income includes a $10,000 unrealized gain on land
that cost $40,000 and was sold to San for $50,000.
PARENT SUBS.
Dr. Land 40,000
Cr. Cash 40,000
Dr. Land 50,000
Dr. Cash 50,000 Cr. Cash 50,000
Cr. Land 40,000
Cr. Gain 10,000
 Downstream Sale of Land
Non Depreciable Assets

Determine the ending balance investment in San at

Dec 31’11
Beg. Bal. Investment (1 Jan’11) $270,000
Add:
Income from San Co:
NI x 90% = $70,000 x 90% = 63,000
Adjustment:
Unrealized profit Land = (10,000)
53,000
End. Bal. Investment (31 Dec’11) $323,000

Determine NCI shares= $70,000 x 10% = $7,000

 Downstream Sale of Land
Non Depreciable Assets
 Pak makes the following entries at Dec 31’11
a) Investment in San 63,000
Income from San 63,000
b) Income from San 10,000
Investment in San 10,000
 Elimination unrealized profit (gain on sale land) at Dec 31’11. (Pls refer to Elim 1)
a) Gain on sale land 10,000
Land 10,000
 Elimination income from Subs. at Dec 31’11. (Pls refer to Chp 4)
b) Income from San 53,000
Investment in San 53,000
 Recognize NCI shares at Dec 31’11. (Pls refer to Chp 4)
c) NCI shares 7,000
Noncontrolling Interest 7,000
 Elimination investment in San at Dec 31’11. (Pls refer to Chp 4)
d) C/S 200,000
RE 100,000
Investment in San 270,000
NCI 30,000
 Downstream Sale of Land
Non Depreciable Assets
 Adjustment in years subsequent to intercompany sale (31 Dec’12) to reduce land to its cost and
adjust investment account to establish reciprocity with San’s equity of the beginning of the period.
(pls refer to Elim 2)
Investment in San 10,000
Land 10,000
 Assume that San uses the land for 4 years and sells it for $65,000 in 2015.
Transaction Journal
Cash 65,000
Land 50,000
Gain on sale of land 15,000
 Compute the income from, and adjust the investment account as usual. Record the realize profit
from sale of land.
Investment in San XXXXX
Income from San XXXX
Investment in San 10,000
Income from San 10,000
 Adjust the realize consolidation gain on the land. (pls refer to Elim 3)
Investment in San 10,000
Gain on sale on land 10,000
 Elimination Journal Entries
DEPRECIABLE ASSETS

Interco. Elim 1 (Current Yr) Elim 2 (Subsequent Yr) Elim 3 (Sale Yr)
Profit
DOWNSTREAM Gain on sale of Eq. XX Investment in Subs. XX Investment in Subs. XX
Equipment XX Accum. Depr. XX Accum. Depr. XX
Equipment XX Gain on sale of Eq. XX
Accum. Depr. XX Accum. Depr. XX Accum. Depr. XX
Depr. Exp. XX Depr. Exp. XX Depr. Exp. XX

UPSTREAM Gain on sale of Eq. XX Investment in Subs. XX Investment in Subs. XX

Equipment XX Accum. Depr. XX Accum. Depr. XX
NCI XX NCI XX
Equipment XX Gain on sale of Eq. XX
Accum. Depr. XX Accum. Depr. XX Accum. Depr. XX
Depr. Exp. XX Depr. Exp. XX Depr. Exp. XX
 Elimination Journal Entries
DEPRECIABLE ASSETS

Interco. Loss Elim 1 (Current Yr) Elim 2 (Subsequent Yr) Elim 3 (Sale Yr)
DOWNSTREAM Equipment XX Equipment XX Loss on sale of Eq. XX
Loss on sale of Eq. XX Investment in Subs. XX Investment in Subs. XX
Accum. Depr. XX Accum. Depr. XX

Depr. Exp. XX Depr. Exp. XX Depr. Exp. XX

Accum. Depr. XX Accum. Depr. XX Accum. Depr. XX

UPSTREAM Equipment XX Equipment XX Loss on sale of Eq. XX

Loss on sale of Eq. XX Investment in Subs. XX Investment in Subs. XX
Accum. Depr. XX Accum. Depr. XX
NCI XX NCI XX
Depr. Exp. XX Depr. Exp. XX Depr. Exp. XX
Accum. Depr. XX Accum. Depr. XX Accum. Depr. XX
 Review Intermediate 1
Depreciable Assets
 Purchased a machinery for $90,000 cash:
Dr. Machinery 90,000
Cr. Cash 90,000

 The machinery with 5 year useful life and no salvage value is

depreciated by the straight line method

 Sold the machinery for $80,000. BV of the machinery on the selling

date is $50,000

Dr. Cash 80,000

Dr. Accumulated depreciation 40,000
Cr. Machinery 90,000
Cr. Gain on sale 30,000
 Downstream Sale of Machinery
Depreciable Assets
Per Co. sells machinery to its 80% owned subsidiary
Sop Co. on 1 Dec’11 for $80,000.
The machinery undepreciated cost of $50,000 on
this date (Cost $90,000 and accum depr $40,000)
PARENT SUBS.
Dr. Machinery 90,000
Cr. Cash 90,000
Dr. Machinery 80,000
Cr. Cash 80,000
Dr. Cash 80,000
Dr. Acc. Depr. 40,000
Cr. Machinery 90,000
Cr. Gain 30,000
Remaining useful life of machinery is 5 yrs.
Depreciation Exp. Analysis:
Cost Acc Depr BV Remaining UL Depr. Exp.
Original Cost 90,000 40,000 50,000 5 10,000
Selling price 80,000 - 80,000 5 16,000
6,000
The $6000 is considered a piecemeal recognition on
1/5 of the $30,000 unrealized gain on the
intercompany transaction. The elimination effect of
the overstated depreciation exp of $6,000:
considered as realized profit in computing the
income from subs.
 Determine the ending investment at 31 Dec’11 – no information related to
investment balance in this problem.
Beg. Bal. Investment (1 Jan’11) XXX
Add:
Income from San Co:
NI x 80% = XXX
Adjustment:
Unrealized profit from sale of machinery = (30,000)
Realized profit on overstated depreciation = 6,000
End. Bal. Investment (31 Dec’11) XXX
 Journal to adjust unrealized profit from sale of machinery:
Income from Sop 30,000
Investment in Sop 30,000
Investment in Sop 6,000
Income from Sop 6,000
 Elimination unrealized profit (gain on sale machinery) at Dec 31’11. (Pls refer to
Elim 1)
a) Gain on sale of machinery 30,000
Machinery 30,000
b) Accumulated Depreciation 6,000
Depreciation Expense 6,000
 In each of the years 2012 – 2015, don’t forget to journalize the piecemeal
realized profit of $6,000.
Investment in Sop 6,000
Income from Sop 6,000
 In 2012, eliminate the effect of the unrealized profit (gain on sale machinery) at
Dec 31’11 (Pls refer to Elim 2)
a) Investment in Sop 24,000
Accumulated Depreciation 6,000
Machinery 30,000
b) Accumulated Depreciation 6,000
Depreciation Expense 6,000