Lobes Co. owns 65% of Banes Limited. During 20X5, Banes sold equipment to Lobes for a gain of $150,000, recognizing a gain on sale (before taxes)of $75,000. Lobes determined that the equipment had a useful life of 10 years, and took a full year's deprecation in 20X5. On April 1, 20X8, Lobes sold the equipment to an unaffiliated company for $110,000. Ignore any taxes.
Required:
Prepare the appropriate consolidation adjustments relating to the equipment for each year ending December 31, 20X5, to 20X8.

This is an upstream sale, and therefore there is an impact on the non-controlling interest.
The various adjustments are provided in journal entry format below:
20X5:
$\begin{array}{llr}\text{ Gain on sale of equipment }& \$75,000& \\ \text{ Equipment }& & \$75,000\end{array}$
$\begin{array}{llr}\text{ Accumulated depreciation}& 7,500& \\ \text{ Depreciation expense }& & 7,500\end{array}$
The net impact of the above adjustments on net income will be to decrease it by $67,500. Of this amount, 35% is attributable to the NCI, while the rest belongs to the owners of the parent.
20X6:
$$\begin{array}{lcc}\text{ Retained earnings, opening }& 43,875& \\ \text{ NCI }& & 23,625\\ \text{ Accumulated depreciation }& 7,500& \\ \text{ Equipment }& & 75,000\end{array}$$ $\begin{array}{llr}\text{Accumulated depreciation }& 7,500& \\ \text{ Depreciation expense }& & 7,500\end{array}$

The decrease in the depreciation expense of $7,500 will increase net income by that amount. Of this amount, $2,625 is attributable to the NCI, while the rest is attributable to the owners of the parent.
20X7:
$$\begin{array}{lcc}\text{ Retained earnings, opening }& 39,000& \\ \text{ NCI }& & 21,000\\ \text{ Accumulated depreciation }& 15,000& \\ \text{ Equipment }& & 75,000\end{array}$$ $\begin{array}{llr}\text{ Accumulated depreciation }& 7,500& \\ \text{ Depreciation expense }& & 7,500\end{array}$

Again, the decrease in depreciation expense of $7,500 will increase net income by that amount. Of this amount, $2,625 is attributable to the NCI, while the rest is attributable to the owners of the parent.
20X8:
$$\begin{array}{lcc}\text{ Retained earnings, opening }& 34,125& \\ \text{ NCI }& & 18,375\\ \text{ Accumulated depreciation }& 22,500& \\ \text{ Equipment }& & 75,000\end{array}$$ $\begin{array}{ccc}\text{ Accumulated depreciation }& 1,875& \\ \text{ Depreciation expense }& & 1,875\end{array}$
(assuming three months' depreciation is taken)
$\begin{array}{lll}\text{ Equpment }& 75,000& \\ \text{ Accumulated depreciation }& & 24,375\\ \text{ Gain on sale of equipment }& & 50,625\end{array}$
The overall impact of the above entries on net income will be to increase it by $52,500 × 35% attributable to the NCI, while the rest is attributable to the owners of the parent.