On January 1, 2013 a Parent Purchased the Plant of a Subsidiary

question 53

Multiple Choice

On January 1, 2013 a parent purchased the plant of a subsidiary for $ 6,000, which was $1,000 below the carrying cost for the subsidiary as at the date it was sold. The plant had a remaining life of ten years and the income tax rate was 30%. What amounts should be shown as a loss on sale of plant and the income tax expense respectively on the consolidated financial statements for the year ended December 31, 2013?

• A)$ 1,000 and $300
• B)$1,000 and $210
• C)$ 500 and $ 150
• D)None of the above.

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Definitions:

Actual Overhead Cost

The real expenses occurring from indirect costs, such as utilities, rent, and administrative expenses, necessary for running a business.

Indirect Labor Costs

Wages paid to employees who are not directly involved in production work but who support the production process.

Factory Overhead Account

Represents all the indirect costs associated with running a production facility that are not directly tied to a specific product.

Overhead Allocation Base

A measure used to distribute overhead costs to various products or service units within a business.