Peo Corp. and Saxe Corp. asset depreciation
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On January 1, year 10,Poe Corp. sold a machine for 900,000 to Saxe Corp., its wholly owned subsidiary. Poe paid 1,100,000 for this machine, which had accumulated depreciation of 250,000. Poe estimated a 100,000 salvage value and depreciated the machine on the straight-line method over 20 years, a policy which Saxe continued. In Poe's December 31, year 10, consolidated balance sheet, this machine should be included in cost and accumulated depreciation as:
Cost | Accumulated depreciation
a) 1,100,000 | 300,000
b) 1,100,000 | 290,000
c) 900,000 | 40,000
d) 850,000 | 42,500
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Solution Summary
This solution calculates the amounts that Peo Corp. should report for cost and accumulated depreciation from the transaction with Saxe Corp.
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