On December 1, 2006, Passey Corporation sold a machine with a carrying amount of

Question

On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary, Scully Company, for $200,000. Scully adopted a four-year economic life, no residual value, and the sum-of-the-years'-digits method of depreciation for the machine. If correct working paper eliminations are prepared for Passey Corporation and subsidiary on November 30, 2007, the end of the fiscal year, Passey's net income to be included in consolidated net income is (disregarding income taxes):
Decreased a net of $30,000
Increased a net of $20,000
Decreased a net of $50,000
Decreased a net of $40,000

Explanation / Answer

Decreased a net of $50,000

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