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

question 67

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 Collins' share of Smeder's net income for 2010.

• A) $12,400.
• B) $14,400.
• C) $11,200.
• D) $12,800.
• E) $18,000.

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