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Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.

On April 1, 2010 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends:

                       2010   2011   2012

Net income   100000 120000 130000

Dividends      40000   50000    60000

a) Compute the amortization of gain through a depreciation adjustment for 2010 for consolidation purposes.

b) Compute the gain on transfer of equipment reported by wilson for 2010.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M939860

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