On 1/1/16 Peck sells a machine with a $20,000 book value to its subsidiary Shea for $30,000.Shea intends to use the machine for 4 years, which was the remaining life that Peck had at the time of the sale.Neither company had assigned a salvage value to the machine.On 12/31/17 Shea sells the machine to an outside party for $14,000.What amount of gain or (loss) for the sale of assets is reported on the consolidated financial statements in 2017?
A)loss of $6,000
B)loss of $1,000
C)gain of $4,000
D)gain of $14,000

Question

On 1/1/16 Peck sells a machine with a $20,000 book value to its subsidiary Shea for $30,000.Shea intends to use the machine for 4 years, which was the remaining life that Peck had at the time of the sale.Neither company had assigned a salvage value to the machine.On 12/31/17 Shea sells the machine to an outside party for $14,000.What amount of gain or (loss) for the sale of assets is reported on the consolidated financial statements in 2017?
A)​loss of $6,000
B)​loss of $1,000
C)​gain of $4,000
D)​gain of $14,000

Quizplus · Accepted Answer

The consolidated financial statements will report a gain of $4,000 on the sale of the machine in 2017. This is because the machine was sold for $14,000, which is $4,000 more than its book value of $10,000 at the time of the sale.

On 1/1/16 Peck Sells a Machine with a $20,000 Book