Can someone tell me where in the question said that Port sold equipment at $15 profit?
Please the see the explanation. Thought i answered the questions correct. but not agree with the answer explanation.
Question CPA-00450
Port, Inc. owns 100% of Salem Inc. On January 1, Year 1, Port sold Salem delivery equipment Port had owned the equipment for two years and used a five-year straight-line depreciation rate a wt ait hg anion. reeqsuiidpumale vnat.l uIne .t hSea lceomn siso liudsaitnegd ain tchoremee-y setaart esmtraeingth, tS-lianlee mde'sp rreeccioartdioend rdaetep rweicthia ntioo nr eesxipdeunasl vea olune t hfoer the equipment for Year 1 will be decreased by:
a. 50% of the gain on sale.
b. 33 1/3% of the gain on sale.
c. 20% of the gain on sale.
d. 100% of the gain on sale.
Explanation
aCmhooiucnet “tbh”a its d ceoprrreeccita. tiDoen perxepceiantsioen heaxsp ebneseen wovilel rbset adteecdr.eased by 33 1/3% of the gain on sale, the
Example:
Original purchase price by Port 100
Two years' depreciation ($100 ÷ 5 = $20 per year × 2) (40)
Net book value at date of sale 60
Sale price to Salem 75
Gain on sale 15
Depreciation expense recorded by Salem ($75 ÷ 3-year life) 25
Consolidated depreciation expense ($100 ÷ 5-year life) 20
Elimination of excess depreciation ($15 gain × 1/3) 5
AUD :56, 72, 77!
FAR : 74, 77!
BEC : 72, 75!
REG : 72, 81!
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