Mortar Corporation Acquired 80 Percent of Granite Corporation's Voting Common

question 34

Multiple Choice

Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1,20X7.On December 31,20X8,Mortar received $390,000 from Granite for equipment Mortar had purchased on January 1,20X5,for $400,000.The equipment is expected to have a 10-year useful life and no salvage value.Both companies depreciate equipments on a straight-line basis.
-Based on the preceding information,in the preparation of the 20X9 consolidated income statement,depreciation expense will be:

• A)debited for $25,000 in the eliminating entries.
• B)credited for $15,000 in the eliminating entries.
• C)debited for $15,000 in the eliminating entries.
• D)credited for $25,000 in the eliminating entries.

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Definitions:

Real Wages

Wages or salaries that have been adjusted for inflation, indicating the purchasing power of the income received by workers.

CPI

The Consumer Price Index is an indicator that calculates the weighted average price of a selection of consumer goods and services, including food, medical care, and transportation.

Real Wages

The purchasing power of wages, taking into account inflation, reflecting the amount of goods and services that can be bought with the wages earned.

Minimum Wage

The lowest legally allowable pay per hour for workers.