Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1,2007.On December 31,2008,Mortar received $390,000 from Granite for a equipment Mortar had purchased on January 1,2005,for $400,000.The equipment is expected to have a 10-year useful life and no salvage value.Both companies depreciate equipments on a straight-line basis.
-Based on the preceding information,in the preparation of the 2009 consolidated financial statements,equipment will be:

Question

Quizplus · Accepted Answer

The equipment was sold at a $10,000 loss ($400,000 original cost - $390,000 sale price). Since the equipment is now part of the consolidated entity, the loss needs to be eliminated, which requires a debit adjustment of $10,000 to the equipment account in the consolidated financial statements.

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