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:

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits.

Market Price

The ongoing cost for buying or selling an asset or service within a market setting.

Acid-Test Ratio

A stringent indicator of a company's liquidity, calculated by dividing liquid assets excluding inventories by current liabilities.