In January 2013, S Company, an 80% Owned Subsidiary of P

question 23

Multiple Choice

In January 2013, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $1,980,000. S Company's original cost for this equipment was $2,000,000 and had accumulated depreciation of $200,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2017 for $1,440,000. What amount of gain should P Company record on its books in 2017?

• A) $60,000.
• B) $120,000.
• C) $240,000.
• D) $360,000.

---

Definitions:

Zoning Variance

Permission granted by a local government allowing a property to be used in a way that deviates from the strict application of zoning laws.

Commercial Space

Commercial Space generally refers to buildings or land intended for use in commerce or business activities, such as retail stores, offices, or factories.

Fifth Amendment

Refers to a part of the U.S. Constitution that protects individuals against self-incrimination, ensures due process of law, and provides protections against double jeopardy among other rights.

Caveat Emptor

A Latin term meaning "let the buyer beware," indicating that the buyer is responsible for checking the quality and suitability of goods before a purchase is made.