On 1/1/16 Peck Sells a Machine with a $20,000 Book

question 31

Multiple Choice

On 1/1/16 Peck sells a machine with a $20,000 book value to its subsidiary Shea for $30,000.Shea intends to use the machine for 4 years, which was the remaining life that Peck had at the time of the sale.Neither company had assigned a salvage value to the machine.On 12/31/17 Shea sells the machine to an outside party for $14,000.What amount of gain or (loss) for the sale of assets is reported on the consolidated financial statements in 2017?

• A)​loss of $6,000
• B)​loss of $1,000
• C)​gain of $4,000
• D)​gain of $14,000

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Definitions:

Certificates of Deposit

Certificates of Deposit (CDs) are financial products offered by banks that provide a fixed interest rate in exchange for keeping a deposit untouched for a predefined period.

Maturity Date

The specific date on which the principal amount of a bond, loan, or other financial instrument is to be paid back in full to the investor.

Tax Bracket

A range of income taxed at a specific rate by the government, part of a progressive tax system.

Corporate Bond

A debt security issued by a corporation and sold to investors, paying fixed interest over its lifetime and repaying the principal at the bond’s maturity date.