On January 1, 2022 Squash Company recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The effect of this transaction on the amount recorded in 2022 by the parent company Pumpkin as its investment income in the Squash was Multiple Choice an increase of $40,000 if the Squash was wholly owned. a decrease of $24,000 if the Squash was 80% owned. an increase of $30,000 if the Squash was wholly owned. a decrease of $36,000 if the Squash was 90% owned.
On January 1, 2022 Squash Company recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The effect of this transaction on the amount recorded in 2022 by the parent company Pumpkin as its investment income in the Squash was Multiple Choice an increase of $40,000 if the Squash was wholly owned. a decrease of $24,000 if the Squash was 80% owned. an increase of $30,000 if the Squash was wholly owned. a decrease of $36,000 if the Squash was 90% owned.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On January 1, 2022 Squash Company recorded a $40,000 profit on the upstream sale of some equipment that had a
remaining four-year life under the straight-line depreciation method. The effect of this transaction on the amount recorded
in 2022 by the parent company Pumpkin as its investment income in the Squash was
Multiple Choice
an increase of $40,000 if the Squash was wholly owned.
a decrease of $24,000 if the Squash was 80% owned.
an increase of $30,000 if the Squash was wholly owned.
a decrease of $36,000 if the Squash was 90% owned.
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