Help Save & Exit Sul Check my Dunn Corporation owns 100 percent of Grey Corporat

Question

Help Save & Exit Sul Check my Dunn Corporation owns 100 percent of Grey Corporation's common stock. On January 2, 2017 Dunn sold to Grey $49,500 of machinery with a carrying amount of $39,000. Grey is depreciating the acquired machinery over a five-year remaining life by the straight-ine method. The net adjustments to compute 2017 and 2018 consolidated net income would be an increase (decrease) of Multiple Choice 2017 (10,500) 2018 2017 2018 $ (10,500) $2,100 2017 $(8,400) 2018 $2,100 2018 2017 S(8,400)

Explanation / Answer

C.2017 ($8,400) .........2018 $2,100.

workings:

but ,

in the consolidated statements machinery is recorded at 39,000

and depreciation will be recorded at (39,000 / 5) =>$7,800.

so the gain of $600 is to be reduced to expense of $7800 in consolidated statement.

So, the reduction of net income in consolidated statements will be = (7800 - (-600))

=>$8,400.

for 2018.

standalone statement will record deprecition of 9,900.

consolidated statement requires only a deprecation of 7,800.

difference will increase consolidated net income =>9,900 - 7,800 =>2,100.

gain on machinery transferred by dunn(49,500 - 39,000) 10,500 depreciation by Grey ($49,500 / 5) (9,900) orginally net income recorded in standalone statements 600

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