TLC Homecare Ltd

question 21

Multiple Choice

TLC Homecare Ltd. owns 100% of Errand Service for Seniors Ltd. (ESS) . On January 2, 20X1, TLC bought 12 identical cars for $300,000. It promptly sold four of the cars to ESS for $112,000. ESS will amortize the cars over five years using the straight-line method. At December 31, 20X2, what is the net adjustment that should be made to accumulated depreciation in TLC's consolidated financial statements? Ignore income taxes.

• A)$0
• B)Reduction of $2,400
• C)Reduction of $4,800
• D)Reduction of $5,600

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Definitions:

Perfectly Elastic

A situation in a market where the quantity demanded or supplied responds infinitely or disproportionately to changes in price.

Cross Elasticity

A measure of how the quantity demanded of one good or service changes in response to a change in the price of another good or service.

Complementary

Goods or services that are used together, where an increase in demand for one leads to an increase in demand for the other.

Income Elasticity

A measure of how much the demand for a product changes in response to changes in consumer income.