Parent owns 70% of Subsidiary. On 12/31/Year 1, Parent sold equipment to Sub for $125,000. The equipment cost Parent $140,000. At the time of the transfer the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation. If operating expenses are not adjusted for the transferred equipment, by what amount will net consolidated net income be overstated or understated on the 12/31/Year 2 Consolidated Financial Statements? $5,000 overstated $3.500 overstated $5,000 understated $3.500 understated