Use the Following Information to Answer the Question(s)below

question 6

Multiple Choice

Use the following information to answer the question(s) below.
On December 31,2011,Pinne Corporation sold equipment with a three-year remaining useful life and a book value of $21,000 to its 70%-owned subsidiary,Sull Company,for a price of $27,000.Pinne bought the equipment four years ago for $49,000.The salvage value is zero.Straight-line depreciation is used by both companies.
-An elimination entry at December 31,2011 for the intercompany sale will include a

• A)credit of $6,000 to Depreciation Expense.
• B)credit of $6,000 to Accumulated Depreciation.
• C)credit of $6,000 to Equipment.
• D)credit of $6,000 to Gain on Sale of Equipment.

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Definitions:

Chart of Accounts

An organized list of all the accounts in a company’s general ledger used for recording financial transactions.

Asset Accounts

Accounts on the balance sheet representing valuable resources owned by the company expected to provide future benefits.

Three Column Form

A documentation format usually used in accounting and bookkeeping that showcases debits, credits, and balance for individual accounts.

Debit

An accounting entry that either increases an asset or expense account, or decreases a liability or equity account.