Question
On December 31, 2014, Pinne Corporation sold equipment with a three-year remaining useful life and a book value of $21,000 to its 70%-owned subsidiary, Sull
On December 31, 2014, Pinne Corporation sold equipment with a three-year remaining useful life and a book value of $21,000 to its 70%-owned subsidiary, Sull Company, for a price of $27,000. Pinne bought the equipment four years ago for $49,000. The salvage value is zero. Straight-line depreciation is used by both companies.
4) An elimination entry at December 31, 2014 for the intercompany sale will include a
A) credit of $6,000 to Depreciation Expense.
B) credit of $6,000 to Accumulated Depreciation.
C) credit of $6,000 to Equipment.
D) credit of $6,000 to Gain on Sale of Equipment.
Can you calculate the correct for each choice? I know the correct answer is C but I want to know how to calculate others.
5) After eliminating/adjusting entries are prepared, what was the intercompany sale impact on the consolidated financial statements for the year ended December 31, 2014?
A) Consolidated Net Income Consolidated Net Assets
No effect No effect
B) Consolidated Net Income Consolidated Net Asset
No effect Increased
C) Consolidated Net Income Consolidated Net Asset
Decreased Decreased
D) Consolidated Net Income Consolidated Net Asset
Decreased No effect
I know the answer is A. Why there is no effect on both NI and Net Assets?
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