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

question 59

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. For consolidation purposes, what net debit or credit will be made for the year 2010 relating to the accumulated depreciation for the equipment transfer?

• A) Debit accumulated depreciation, $46,000.
• B) Debit accumulated depreciation, $48,000.
• C) Credit accumulated depreciation, $48,000.
• D) Credit accumulated depreciation, $46,000.
• E) Debit accumulated depreciation, $2,000.

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Definitions:

Conditioned Response

An automatic response established by training to an ordinarily neutral stimulus.

Conditioned Stimulus (CS)

A previously neutral stimulus that eventually elicits a conditioned response after being paired with the unconditioned stimulus.

Unconditioned Stimulus (US)

A stimulus that produces a response without prior learning.

Contiguity

In learning theory, refers to the proximity in time or space between two events, which can influence the association formed between them.