On January 1, 20X7, Servant Company purchased a machine with an expected economic life of five years. On January 1, 20X9, Servant sold the machine to Master Corporation and recorded the following entry: Master Corporation holds 75 percent of Servant's voting shares. Servant reported net income of $50,000, and Master reported income from its own operations of $100,000 for 20X9. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer.
Based on the preceding information, in the preparation of the 20X9 consolidated income statement, depreciation expense will be:
A) Debited for $1,000 in the eliminating entries.
B) Credited for $1,000 in the eliminating entries.
C) Debited for $15,000 in the eliminating entries.
D) Credited for $15,000 in the eliminating entries.

Question

On January 1, 20X7, Servant Company purchased a machine with an expected economic life of five years. On January 1, 20X9, Servant sold the machine to Master Corporation and recorded the following entry:  Master Corporation holds 75 percent of Servant's voting shares. Servant reported net income of $50,000, and Master reported income from its own operations of $100,000 for 20X9. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer.
Based on the preceding information, in the preparation of the 20X9 consolidated income statement, depreciation expense will be:
A) Debited for $1,000 in the eliminating entries. 
B) Credited for $1,000 in the eliminating entries. 
C) Debited for $15,000 in the eliminating entries. 
D) Credited for $15,000 in the eliminating entries.

Quizplus · Accepted Answer

The Answer of On January 1, 20X7, Servant Company purchased a machine with an expected economic life of five years. On January 1, 20X9, Servant sold the machine to Master Corporation and recorded the following entry:  Master Corporation holds 75 percent of Servant's voting shares. Servant reported net income of $50,000, and Master reported income from its own operations of $100,000 for 20X9. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer.
Based on the preceding information, in the preparation of the 20X9 consolidated income statement, depreciation expense will be:
A) Debited for $1,000 in the eliminating entries. 
B) Credited for $1,000 in the eliminating entries. 
C) Debited for $15,000 in the eliminating entries. 
D) Credited for $15,000 in the eliminating entries.

On January 1, 20X7, Servant Company Purchased a Machine with an Expected