Plesco Corporation acquired 80 percent of Slesco Corporation's voting common stock on January 1,20X7.On January 1,20X8,Plesco received $350,000 from Slesco for equipment Plesco 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 20X9 consolidated income statement,depreciation expense will be:

Question

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The equipment was sold at a loss of $50,000 ($400,000 - $350,000). The annual depreciation on the equipment is $40,000 ($400,000/10 years). The gain or loss on the intercompany sale must be eliminated, and the depreciation expense adjusted. The excess depreciation of $10,000 ($50,000/5 years remaining) must be credited to reduce the depreciation expense in the consolidated income statement.

Plesco Corporation Acquired 80 Percent of Slesco Corporation's Voting Common