Mortar Corporation acquired 80 percent of Granite Corporation\'s voting common s

Question

Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1, 20X7. On December 31, 20X8, Mortar received $390,000 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, the gain on sale of the equipment recorded by Mortar for 20X8 is:

A. $150,000

B. $65,000

C. $110,000

D. $40,000

Based on the preceding information, in the preparation of the 20X9 consolidated financial statements, equipment will be:

A. debited for $1,000

B. debited for $10,000

C. credited for $15,000

d. debited for $25,000

Explanation / Answer

Ans 1 Mortar received on Dec 31 20X8 390000 Book value as on Dec 31 20X8 Cost-Accumulated depreciation 400000-(400000/10 years*4) 240000 Gain on sale of equipment 150000 Option A $150000 is correct ans 2 Option B debited for $10000

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