On January 1, 2019, Polo Corporation sold equipment with a carrying amount of $40,000 and a 20-year remaining useful life to its wholly-owned subsidiary, Solo Corporation, for $60,000. Both Polo and Solo use the straight-line depreciation method, assuming no residual value. On December 31, 2019, the separate company financial statements held the following balances associated with the equipment:

Polo Corporation: Gain on sale of equipment, $20,000

Solo Corporation: Depreciation expense, $3,000 Equipment, $60,000 Accumulated depreciation, $3,000

A working paper entry to consolidate the financial statements of Polo and Solo on December 31, 2019 included a:

Multiple Choice

• debit to gain on sale of equipment for $19,000.

• credit to gain on sale of equipment for $20,000.

• debit to accumulated depreciation for $1,000.

• credit to depreciation expense for $3,000.