Wilson Owned Equipment with an Estimated Life of 10 Years

question 93

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, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.
On April 1, 2010 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: $\begin{array}{lrrr}&2010&2011&2012\\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends } & 40,000 & 50,000 & 60,000\end{array}$
-Compute the amortization of gain through a depreciation adjustment for 2011 for consolidation purposes.

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

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Definitions:

Social Security

Social Security is a government program that provides financial assistance to people with inadequate or no income, including retirees, disabled people, and their families.

National Income

National Income is the total value of all goods and services produced by a country's economy over a specific time period, plus income from abroad, minus income remittances to other countries.

GDP

Gross Domestic Product, it measures the total economic output of a country, representing the market value of all goods and services produced over a specific time period.

Per Capita

A statistical measure that divides an aggregate by the number of individuals in the population, commonly used to express economic indicators.