Test Bank For Advanced Accounting 12th Edition Beams et al.

Test Bank For Advanced Accounting 12th Edition Beams et al. On December 31, 2014, Pinne Corporation sold equipment with a three-year remaining useful life and a book value of $21,000 to its 70%-owned subsidiary, Sull Company, for a price of $27,000. Pinne bought the equipment four years ago for $49,000. The salvage value is zero. Straight-line depreciation is used by both companies. 4) An elimination entry at December 31, 2014 for the intercompany sale will include a A) credit of $6,000 to Depreciation Expense. B) credit of $6,000 to Accumulated Depreciation. C) credit of $6,000 to Equipment. D) credit of $6,000 to Gain on Sale of Equipment. Answer: C Objective: LO2 Difficulty: Moderate 5) After eliminating/adjusting entries are prepared, what was the intercompany sale impact on the consolidated financial statements for the year ended December 31, 2014? A) Consolidated Net Income Consolidated Net Assets No effect No effect B) Consolidated Net Income Consolidated Net Asset No effect Increased C) Consolidated Net Income Consolidated Net Asset Decreased Decreased D) Consolidated Net Income Consolidated Net Asset Decreased No effect Answer: A Objective: LO2 Difficulty: Moderate 6) On January 2, 2014, Paogo Company sold a truck with book value of $15,000 to Sanall Corporation, its wholly-owned subsidiary, for $20,000. The truck had a remaining useful life of five years with zero salvage value. Both firms use the straight-line depreciation method. If Paogo failed to make year-end adjustments/eliminations on the consolidated working papers in 2014, consolidated depreciation expense for 2014 would be A) $5,000 too high. B) $5,000 too low.