Question
Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2013, Thomson acquired a building with a 10-year life for
Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2013, Thomson acquired a building with a 10-year life for $455,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2015, Thomson sold this building to Stayer for $408,000. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2015, how does this transfer affect the computation of consolidated net income? |
Income must be reduced by $38,500.
Income must be reduced by $39,300.
Income must be reduced by $44,000.
Income must be reduced by $49,500.
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