On January 1, 2010, Smeder Company, an 80% Owned Subsidiary

question 87

Multiple Choice

On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. Compute the gain recognized by Smeder Company relating to the equipment for 2010.

• A) $36,000.
• B) $34,000.
• C) $12,000.
• D) $10,000.
• E) $0.

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Definitions:

Self-determination

The concept of individuals having the freedom and ability to make choices and control their own lives.

Competence Stage

refers to one of the levels in the psychological theory of skill acquisition, where an individual becomes consciously skilled at a task.

Learning Curve

The rate of a person's progress in gaining experience or new skills, typically described as the relationship between learning and time.

Life Context

The various personal, social, and environmental factors that influence an individual's experiences and perspectives.