Question

Photos - Screenshot (250).png - 0% See all phalus + Add to Search > Edit & Create S hare 6 .. Question 4 (1 point) The Parent Company had purchased a piece of equipment for $100,000 the equipment is expected to last 10 years with no salvage. At the beginning of year 5, Parent Company sold the equipment to its wholly owned subsidiary Subbie Company for $66000. Subbie Company believes the machine will last 6 years and have no salvage. Subbie also uses straight line depreciation. At the end of year 5 what depreciation expense will Parent Company show on its income statement? O 10000 0 6600 O 11000 0 600 ...- --- FIA- - Type here to search W @ @ N A M ENG 9:09 PM NIL 2/20/2020

Answer 1

Answer:

$11,000

Explanation:

Given, at the beginning of year 5, parent company transferred its equipment to its wholly owned subsidiary for $66,000.

Since, the subsidiary is a separate entity, the asset must be recorded in it's transfer price.

Remaining useful Life = 6 years

Salvage value = Nil

Method of Depreciation = Straight-line method

Therefore, Depreciation at the end of year five =

(Value of Asset - Salvage Value ) ÷ Useful life

=( $66,000 - 0 ) ÷ 6

= $11,000

:. At the end of year five ,the parent company will show depreciation of $11,000 in it's income statement.