8. Mortar Corporation acquired 80 percent of Granite Corporation\'s voting commo

Question

8. Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1, 20X7. On January 1, 20X8, Mortar received $350,000 from Granite for equipment Mortar had purchased on January 1, 20X5, for $400,000. The equipment is expected to have a 10-year useful life and no salvage value. Both companies depreciate equipment on a straight-line basis. Based on the preceding information, in the preparation of the 20X8 consolidated financial statements, equipment will be:                                                         

     debited for $50,000.
      debited for $40,000.
      credited for $70,000.
      debited for $25,000.

Explanation / Answer

Hi,

Option A (Debited for 50000) is correct.

Note:

It is the difference between the amount received and the purchase price.

Thanks.

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