Wilson Owned Equipment with an Estimated Life of 10 Years

question 89

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 amortization of gain through a depreciation adjustment for 2013 for consolidation purposes.

• A)$1,950.
• B)$1,825.
• C)$2,000.
• D)$1,500.
• E)$7,000.

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Definitions:

Sale of Services

A sale of services occurs when a transaction is made in which the seller provides a service, such as consultation or maintenance, to the buyer in exchange for payment.

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize the law among the states.

Copyright

A legal right granted to the creator of an original work, including the right to copy, distribute, and adapt the work.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, intended to standardize practices and streamline interstate commerce.