Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorpor

Question

Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2013, Thomson acquired a building with a 10-year life for $424,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2015, Thomson sold this building to Stayer for $373,600. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2015, how does this transfer affect the computation of consolidated net income?

Income must be reduced by $30,100.

Income must be reduced by $29,360.

Income must be reduced by $38,700.

Income must be reduced by $34,400

Explanation / Answer

Income must be reduced by 34400

because on sale of building Thomson earned a gain of $ 34400 ( Book value 339200 and sold at 373600)

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