On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life.

Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively.

6. What was the amount of the gain or loss on the sale of equipment reported by Republic on its pre-consolidation income statement in 2020?

a. $-0-

b. $ 5,000 gain

c. $20,000 loss

d. $35,000 gain

7. What was the amount of the credit to depreciation expense on the 2021 consolidation worksheet?

a. $ 750

b. $-0-

c. $1,000

d. $1,600

8. Assume that Republic uses the equity method to account for its investment in Barre. What is the balance in the pre-consolidation Income (loss) from Subsidiary account for 2021?

a. $166,000

b. $266,000

c. $270,000

d. $271,000

9. Assume Republic uses the cost method to account for its investment in Barre. What is the balance in the pre-consolidation Income (loss) from Subsidiary account for 2020?

a. $245,750

b. $165,000

c. $ 90,000

d. $ 88,750