Sky Corporation owns 75 percent of Earth Company's stock.On July 1,2008,Sky sold a building to Earth for $33,000.Sky had purchased this building on January 1,2006,for $36,000.The building's original eight-year estimated total economic life remains unchanged.Both companies use straight-line depreciation.The equipment's residual value is considered negligible.
-Based on the information provided,while preparing the 2008 consolidated income statement,depreciation expense will be:

Question

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The building was sold at a loss of $3,000 ($36,000 - $33,000). The depreciation expense needs to be adjusted for the intercompany sale. The annual depreciation is $4,500 ($36,000 / 8 years). For half a year, it is $2,250. The depreciation based on the new cost for Earth is $2,062.50 ($33,000 / 8 years / 2). The difference of $187.50 needs to be eliminated for half a year, resulting in a credit of $750 for the full year in the eliminating entries.

Sky Corporation Owns 75 Percent of Earth Company's Stock