A parent owns 80% of its subsidiary. The parent sells equipment to the subsidiary for a gain of $80,000 at the beginning of 2017. At that time, the equipment had a remaining life of five years. The subsidiary uses straight-line depreciation with no residual value.

How will the intra-entity sales consolidation entries for this transaction affect consolidated income for 2017, assuming the subsidiary still holds the equipment?

Multiple Choice

• $48,000 decrease

• $48,000 increase

• $64,000 decrease

• $16,000 increase