Wilson Owned Equipment with an Estimated Life of 10 Years

question 44

Multiple Choice

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: $\begin{array}{lrrr}&2012&2013&2014\\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends } & 40,000 & 50,000 & 60,000\end{array}$ Compute the gain on transfer of equipment reported by Wilson for 2012.

• A)$19,500.
• B)$18,250.
• C)$11,750.
• D)$38,250.
• E)$37,500.

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Definitions:

Tropical Forests

Dense, warm, and wet forests found near the Equator, characterized by high biodiversity and a variety of flora and fauna.

British North American Act

A 19th century act of the Parliament of the United Kingdom that established a federation and a federal system of government for Canada.

Wildlife

Animals, plants, and other organisms living in their natural habitats undomesticated or unaffected by human activity, important for biodiversity and ecosystems.

Canada

Canada is a country located in the northern part of North America, known for its vast landscapes, multicultural diversity, and strong economy.