On January 2, 2013, Prembolt Corp sold equipment with a book value of $24,000 and a three-year remaining useful life to its wholly owned subsidiary. Sully Corporation, at a price $6,000in excess of book value. What is the effect of the intercompany sale on Prembolt's incomefrom Sully account for 2013 and its investment in Sully account on December 31, 2013?ABсDEa. Ab. BC. сd. De. EIncome from SullyDecrease of $4,000Decrease of $6,000Increase of $6,000No effectNone of the aboveInvestment in SullyDecrease of $4,000Decrease of $4,000Decrease of $4,000No effect

Intercompany sale accounting involves transactions between affiliated entities within the same…

Answered: a. A b. B c. C d. D e. E

Business

Accounting

a. A b. B c. C d. D e. E

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 2, 2013, Prembolt Corp sold equipment with a book value of $24,000 and a three-
year remaining useful life to its wholly owned subsidiary. Sully Corporation, at a price $6,000
in excess of book value. What is the effect of the intercompany sale on Prembolt's income
from Sully account for 2013 and its investment in Sully account on December 31, 2013?
A
B
с
D
E
a. A
b. B
C. с
d. D
e. E
Income from Sully
Decrease of $4,000
Decrease of $6,000
Increase of $6,000
No effect
None of the above
Investment in Sully
Decrease of $4,000
Decrease of $4,000
Decrease of $4,000
No effect

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