Black Ltd. owns all of the outstanding shares of White Inc. On January 1, Year 5, White sold equipment to Black and recorded a before-tax profit of $20,000 on the transaction. (Whites tax rate is 40 percent.) Black is depreciating this equipment over five years, using the straight-line method. The net adjustments to calculate the Year 5 and Year 6 consolidated net income attributable to Blacks shareholders would be an increase of how much?

Multiple Choice

• Year 5: $9,600

  Year 6: $2,400

• Year 5: $20,000

  Year 6: $0

• Year 5: $16,000

  Year 6: $4,000

• Year 5: $20,000

  Year 6: $4,000