On 1/1/X1 Peck Sells a Machine with a $20,000 Book

question 21

Multiple Choice

On 1/1/X1 Peck sells a machine with a $20,000 book value to its subsidiary Shea for $30,000. Shea intends to use the machine for 4 years. On 12/31/X2 Shea sells the machine to an outside party for $14,000. What amount of gain or (loss) for the sale of assets is reported on the consolidated financial statements?

• A) loss of $6,000
• B) loss of $1,000
• C) gain of $4,000
• D) gain of $14,000

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Definitions:

Merchandise Inventory

The goods a company holds for the purpose of sale to customers.

Cost of Goods Sold

The total cost associated with making or buying the products that a company has sold during a period.

Indirect Manufacturing Cost

Costs in the production process that cannot be directly traced to specific units of product, such as maintenance and facility costs.

Units Produced

The total number of complete products manufactured during a specific period.