On January 1, 2025, Jill Inc. sold equipment to its subsidiary, Tim Co., for $125,000. The equipment had cost $150,000, and the balance in accumulated depreciation was $70,000. The equipment had an estimated remaining useful life of eight years and no salvage value. Both companies use straight-line depreciation. On their separate 2025 income statements, Jil and Tim reported depreciation expenses of $86,000 and $64,000, respectively. The amount of depreciation expense on the consolidated income statement for 2025 would have been: O $134,375. O $144,375.

On January 1, 2025, Jill Inc. sold equipment to its subsidiary, Tim Co., for $125,000. The equipment had cost $150,000, and the balance in accumulated depreciation was $70,000. The equipment had an estimated remaining useful life of eight years and no salvage value. Both companies use straight-line depreciation. On their separate 2025 income statements, Jil and Tim reported depreciation expenses of $86,000 and $64,000, respectively. The amount of depreciation expense on the consolidated income statement for 2025 would have been: O $134,375. O $144,375.

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Description: On January 1, 2025, Jill Inc. sold equipment to its subsidiary, Tim Co., for $125,000. Theequipment had cost $150,000, and the balance in accumulated depreciation was $70,000.The equipment had an estimated remaining useful life of eight years and no

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

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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Question

On January 1, 2025, Jill Inc. sold equipment to its subsidiary, Tim Co., for $125,000. The
equipment had cost $150,000, and the balance in accumulated depreciation was $70,000.
The equipment had an estimated remaining useful life of eight years and no salvage value.
Both companies use straight-line depreciation. On their separate 2025 income statements, Jill
and Tim reported depreciation expenses of $86,000 and $64,000, respectively. The amount
of depreciation expense on the consolidated income statement for 2025 would have been:
O $134,375.
O $144,375.
$150,000.
O $155,625.
O $165,625.

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