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Q.2) Riyadh Electric Company purchased a machine on Jan 1, 2011 for $ 240,000 and estimated that the machine would have a useful life of

Q.2) Riyadh Electric Company purchased a machine on Jan 1, 2011 for $ 240,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on Dec. 31, 2012, Riyadh Electric Company sold the machine to its 100 % owned subsidiary, Medina Co. for $ 200,000. Medina Co. estimated that the asset had a remaining useful life of five years.

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What is the amount of the gain or loss recorded by Riyadh Electric Company at the time of the fixed transfer? What balance would have existed if the transfer had not taken place?

Show the worksheet entry on Dec. 31, 2012 to eliminate the asset transfer to make adjustment to change form ‘Actual’ to ‘As If’ the asset hadn’t been transferred.


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