Asked by Suzanne Meyer on Apr 25, 2024
Verified
Both companies do not claim amortization for assets purchased in the second half of the year. For Cooper's December 31, 20X3, consolidated financial statements, what net book value should be shown for the machine?
A) $125,000
B) $150,000
C) $180,000
D) $250,000
Net Book Value
The net book value is the value at which an asset is carried on a balance sheet, calculated as the original cost minus accumulated depreciation and impairment losses.
Carrying Value
The net amount at which an asset or liability is reported in the financial statements, factoring in its original cost and any related depreciation, amortization, or impairment costs.
Useful Life
The estimated period over which an asset is expected to be functional and contribute to the operations of a business, beyond which it might be deemed obsolete.
- Understand the procedure and consequences of transactions between affiliated companies on adjustments made during consolidation for depreciation expense, net book value of equipment, and interests held by non-controlling parties.
Verified Answer
PC
priyanka chakraborty7 days ago
Final Answer :
B
Explanation :
Since Cooper owns 70% of Effy's common shares, it has significant influence over Effy and must use the equity method of accounting to consolidate Effy's financial statements with its own.
When Effy sold the machine to Cooper, the transaction was between a parent company and its subsidiary, and no profit or loss can be recognized on this transaction. The net book value (NBV) of the machine should be the carrying value of $150,000, which is the amount that Cooper should report on its consolidated financial statements.
When Effy sold the machine to Cooper, the transaction was between a parent company and its subsidiary, and no profit or loss can be recognized on this transaction. The net book value (NBV) of the machine should be the carrying value of $150,000, which is the amount that Cooper should report on its consolidated financial statements.
Learning Objectives
- Understand the procedure and consequences of transactions between affiliated companies on adjustments made during consolidation for depreciation expense, net book value of equipment, and interests held by non-controlling parties.