On January 1, 2012, Smeder Company, an 80% Owned Subsidiary

question 46

Multiple Choice

On January 1, 2012, Smeder Company, an 80% owned subsidiary of Collins, Inc. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2012 and 2013, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.
Compute the gain recognized by Smeder Company relating to the equipment for 2012.

• A) $36,000.
• B) $34,000.
• C) $12,000.
• D) $10,000.
• E) $0.

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Definitions:

Cognitive Ability

The capacity of an individual to perform various mental activities related to learning, problem-solving, decision-making, and similar intellectual functions.

Selling Process

A structured approach to selling that involves identifying prospects, presenting products, overcoming objections, and closing sales, aimed at converting leads into customers.

Tangible Attributes

Physical features or characteristics of a product that can be sensed directly, such as size, design, or color.

Reputation

The general belief or opinion that the public has about the character, quality, or credibility of a person, company, or product.