On January 2,20X5,Ross Co.acquired 90% of Singh Ltd.for $490,000.On that date,Singh's shareholders' equity totalled $420,000.Ross uses the equity method to record its investment.On the acquisition date,Ross sold a capital asset,with a remaining useful life of 10 years,to Singh for a gain of $14,000.At Ross's December 31,20X5 year-end,what is the amount of realized profit with respect to the sale of this capital asset? Ignore income taxes.

Question

Quizplus · Accepted Answer

The realized profit is the portion of the gain that is recognized over the asset's useful life. Since the asset has a 10-year life, the annual realized profit is $14,000 / 10 = $1,400.