Question
Terry owns 90% of Bright Inc. (Bright) and 100% of Shiny Inc. (Shiny). Bright, which reports under ASPE, purchased some manufacturing equipment from Shiny during
Terry owns 90% of Bright Inc. (Bright) and 100% of Shiny Inc. (Shiny). Bright, which reports under ASPE, purchased some manufacturing equipment from Shiny during the year for $220,000. Shiny is a lighting manufacturing company, and this equipment is excess due to a decrease in Shinys production levels. Bright plans to use it to upgrade its existing manufacturing equipment. The equipment had a book value of $125,000 and an original cost of $500,000, and has a current market value of $280,000. What entry should Bright make to record the purchase?
Question options:
| A | DR Equipment $125,000; DR Retained earnings $95,000; CR Cash $220,000 |
| B | DR Equipment $280,000; CR Contributed surplus $60,000; CR Cash $220,000 |
| C | DR Equipment $220,000; CR Cash $220,000 |
| D | DR Equipment $500,000; CR Contributed surplus $280,000; CR Cash $220,000 |
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