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:

Question

Quizplus · Accepted Answer

The equipment was sold at a gain of $50,000 ($350,000 - $300,000). The gain is eliminated in consolidation, so the equipment will be debited for $50,000.

Mortar Corporation Acquired 80 Percent of Granite Corporation's Voting Common