Wilson Owned Equipment with an Estimated Life of 10 Years

question 85

Multiple Choice

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.
On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends:
Compute the amortization of gain through a depreciation adjustment for 2013 for consolidation purposes.

• A) $1,950.
• B) $1,825.
• C) $2,000.
• D) $1,500.
• E) $7,000.

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Definitions:

Propane

A flammable hydrocarbon gas that is a component of natural gas, commonly used as fuel.

Condensed Structural Formula

A method of representing the molecular structure of a chemical compound where bonds and atoms are shown using symbols without depicting the actual bond angles or lengths.

Induce Dipole

The temporary polarization of a molecule caused by the vicinity of a charged object or another polar molecule.

Electron Cloud

A model describing the area around an atomic nucleus where electrons are likely to be found, depicting electron positions as a cloud-like distribution.