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3, Purple Inc. sells equipment with a book value of $80,000 to Snout Co., its 75%-owned subsidiary, for $100,000 on January 1, 2016. Snout determines that the remaining useful life of the remaining useful life of the equipment is four years and uses straight-line depreciation. The December 31, 2016 separate financial statements of Purple and Snout show equipment-net of $500,000 and 300,000, respectively. Consolidated equipment-net will be: a) $800,000 b) $785,000 c) $780,000 d) $650,000
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Answer #1

Solution: Option(c) is correct i.e. $780,000.

Explanation: Calculation of Consolidated equipment(net):

Particulars Amount($)
Equipment(net)- Purple 500000
Equipment(net)- Snout 300000
Profit on equipment sold($100,000-$80,000) (20000)
Consolidated Equipment(net) 780000
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