Cooper Ltd

question 9

Multiple Choice

Cooper Ltd. acquired 70% of the common shares of Effy Ltd. at January 2, 20X1. At December 31, 20X3, Effy sold a machine to Cooper for $180,000. Effy had purchased the machine a few years earlier for $250,000. At the time of sale to Cooper, the machine had a carrying value of $150,000 and a remaining useful life of six years.
- Both companies do not claim depreciation for assets purchased in the second half of the year. For Cooper's December 31, 20X3, separate-entry financial statements, what net book value should be shown for the machine?

• A)$125,000
• B)$150,000
• C)$180,000
• D)$250,000

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Definitions:

Terms 2/10, N/30

Payment terms indicating that a buyer can take a 2% discount if the bill is paid within 10 days, with the net amount due in 30 days.

Net Method

An accounting technique where discounts for early payment are assumed to be taken, reducing the amount recorded as accounts receivable.

Periodic Inventory System

An inventory valuation method where the inventory count and cost of goods sold is determined at the end of the accounting period.

Terms 4/15, N/60

A commercial credit term indicating that a 4% discount is available if paid within 15 days, with the net (full) amount due within 60 days.