Question
Pea Company purchased 70 percent of Split Company's stock approximately 20 years ago. On December 31, 20X8, Pea purchased a building from Split for
Pea Company purchased 70 percent of Split Company's stock approximately 20 years ago. On December 31, 20X8, Pea purchased a building from Split for $ 300,000. Split had purchased the building on January 1, 20X1, at a cost of $ 400,000 and used straight-line depreciation on an expected life of 20 years. The asset's total estimated economic life is unchanged as a result of the intercompany sale. Required: a. What amount of depreciation expense on the building will Pea report for 20X9? Annual depreciation expense reported by Pea $ 0 b. What amount of depreciation expense would Split have reported for 20X9 if it had continued to own the building? Annual depreciation expense reported by Split $ 20,000
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