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

In consolidation, accumulated depreciation is eliminated by crediting the depreciation expense to remove intercompany transactions.

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