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

question 1

Multiple Choice

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.

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Definitions:

Fraudulent Misrepresentations

False statements made with the intent to deceive, which leads someone to enter into a contract to their detriment.

Joint Ventures

Business arrangements where two or more parties agree to pool resources for a specific project or business activity.

Foreign Investors

Individuals or entities from one country investing in the assets or businesses of another country.

Mutual Mistake

An error shared by all parties to a contract, possibly making the agreement voidable.