Question
On January 1, 2010, Seder Company, an 80% owned subsidiary of Colls, Inc., transferred equipment with a 10-year life (six of which remain with no
On January 1, 2010, Seder Company, an 80% owned subsidiary of Colls, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Colls in exchange for $84,000 cash. At the date of transfer, Seder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Seder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. What is the net effect on consolidated net income in 2010 due to the equipment transfer? Decrease $10,000. Decrease $12,000. Increase $10,000. Increase $2,000.
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