Fact Pattern:Scroll, Inc., a wholly owned subsidiary of Pirn, Inc., began operations on January 1, Year 4. The following information is from the condensed Year 4 income statements: Pirn Scroll Sales to Scroll$100,000$ -- Sales to others400,000 300,000 $500,000$300,000Cost of goods sold: Acquired from Pirn-- 80,000Acquired from others350,000 190,000 Gross profit$150,000$ 30,000Depreciation40,00010,000Other expenses60,000 15,000 Income from operations$ 50,000$ 5,000Gain on sale of equipment to Scroll12,000 -- Income before income taxes$ 62,000 $ 5,000 Additional Information Sales by Pirn to Scroll are made on the same terms as those made to third parties.Equipment purchased by Scroll from Pirn for $36,000 on January 1, Year 4, is depreciated using the straight-line method over 4 years.What amount should be reported as depreciation expense in Pirn’s Year 4 consolidated income statement?

Eliminating inter company transactions is an important accounting function that ensures accuracy in…

Answered: What amount should be reported as…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Fact Pattern:

Scroll, Inc., a wholly owned subsidiary of Pirn, Inc., began operations on January 1, Year 4. The following information is from the condensed Year 4 income statements:

	Pirn	Scroll
Sales to Scroll	$100,000	$ --
Sales to others	400,000	300,000
	$500,000	$300,000
Cost of goods sold:
Acquired from Pirn	--	80,000
Acquired from others	350,000	190,000
Gross profit	$150,000	$ 30,000
Depreciation	40,000	10,000
Other expenses	60,000	15,000
Income from operations	$ 50,000	$ 5,000
Gain on sale of equipment to Scroll	12,000	--
Income before income taxes	$ 62,000	$ 5,000

Additional Information

Sales by Pirn to Scroll are made on the same terms as those made to third parties.
Equipment purchased by Scroll from Pirn for $36,000 on January 1, Year 4, is depreciated using the straight-line method over 4 years.

What amount should be reported as depreciation expense in Pirn’s Year 4 consolidated income statement?

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions