{"id":222044,"date":"2025-05-30T20:14:22","date_gmt":"2025-05-30T20:14:22","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=222044"},"modified":"2025-05-30T20:14:24","modified_gmt":"2025-05-30T20:14:24","slug":"on-1-3-x6-pylux-sold-equipment-costing-100000-to-its-100-owned-subsidiary-sylux-for-80000","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/30\/on-1-3-x6-pylux-sold-equipment-costing-100000-to-its-100-owned-subsidiary-sylux-for-80000\/","title":{"rendered":"On 1\/3\/x6, Pylux sold equipment costing 100000 to its 100%-owned subsidiary, Sylux, for 80000."},"content":{"rendered":"\n<p>On 1\/3\/x6, Pylux sold equipment costing 100000 to its 100%-owned subsidiary, Sylux, for 80000. At the time of the sale, the equipment had been 50% depreciated (using the straight line method and an assigned life of 10 years). SYlux continued depreciating the equipment by using the straight line method over a remaining life of 5 years.<\/p>\n\n\n\n<p>What are the cost and accumulated depreciation, respectively, of this equipment in the 12\/31\/x6 consolidated balance sheet?<\/p>\n\n\n\n<p>a. 80000 and 16000<\/p>\n\n\n\n<p>b. 80000 and 56000<\/p>\n\n\n\n<p>c. 80000 and 60000<\/p>\n\n\n\n<p>d. 100000 and 16000<\/p>\n\n\n\n<p>e. 100000 and 60000<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-5-color\">The <\/mark><\/strong><\/p>\n\n\n\n<p><strong>Correct Answer: e. 100000 and 60000<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Explanation:<\/strong><\/h3>\n\n\n\n<p>This is a classic <strong>intercompany sale of depreciable asset<\/strong> problem in <strong>consolidated financial statements<\/strong>. Here\u2019s a step-by-step breakdown of how we arrive at the correct answer:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1. Original Equipment Info (in Pylux\u2019s books):<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Cost<\/strong>: $100,000<\/li>\n\n\n\n<li><strong>Depreciation method<\/strong>: Straight-line over 10 years<\/li>\n\n\n\n<li><strong>At 1\/3\/x6 (sale date)<\/strong>:\n<ul class=\"wp-block-list\">\n<li>50% depreciated \u2192 Accumulated Depreciation = $50,000<\/li>\n\n\n\n<li>Net Book Value = $50,000<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2. Sale to Subsidiary (Sylux):<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sold for $80,000 \u2192 <strong>Upstream sale<\/strong> (subsidiary bought from parent)<\/li>\n\n\n\n<li>Gain on sale = $80,000 \u2013 $50,000 = <strong>$30,000 (unrealized)<\/strong>\n<ul class=\"wp-block-list\">\n<li>This gain is <strong>eliminated<\/strong> in the <strong>consolidation<\/strong> process since no gain is recognized on intercompany transactions from the group perspective.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>3. Sylux\u2019s Depreciation:<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sylux records the asset at $80,000 and depreciates over <strong>5 years<\/strong> \u2192 $16,000\/year<\/li>\n\n\n\n<li>Depreciation expense for 12 months in 20&#215;6 = $16,000<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>4. Consolidated Balance Sheet Adjustments (as of 12\/31\/x6):<\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Cost:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The original historical cost to the group is $100,000 \u2192 <strong>no change<\/strong><\/li>\n\n\n\n<li>So in the <strong>consolidated balance sheet<\/strong>, <strong>cost = $100,000<\/strong><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Accumulated Depreciation:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Originally depreciated $50,000 by Pylux<\/li>\n\n\n\n<li>Sylux added $16,000 more depreciation during the year<\/li>\n\n\n\n<li>But from the group\u2019s view, depreciation should continue as if asset was not sold (straight-line over 10 years)\n<ul class=\"wp-block-list\">\n<li>Depreciation for 20&#215;6 = $10,000 (1 year post-sale depreciation)<\/li>\n\n\n\n<li>Accumulated depreciation = $50,000 + $10,000 = <strong>$60,000<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">\u2705 <strong>Final Consolidated Figures:<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Cost<\/strong>: $100,000<\/li>\n\n\n\n<li><strong>Accumulated Depreciation<\/strong>: $60,000<\/li>\n\n\n\n<li><strong>Answer: (e) 100000 and 60000<\/strong><\/li>\n<\/ul>\n\n\n\n<p>All intercompany profit and incorrect depreciation must be <strong>reversed<\/strong> for proper group reporting.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/05\/learnexams-banner9-86.jpeg\" alt=\"\" class=\"wp-image-222045\"\/><\/figure>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-5-color\">Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On 1\/3\/x6, Pylux sold equipment costing 100000 to its 100%-owned subsidiary, Sylux, for 80000. At the time of the sale, the equipment had been 50% depreciated (using the straight line method and an assigned life of 10 years). SYlux continued depreciating the equipment by using the straight line method over a remaining life of 5 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-222044","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/222044","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=222044"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/222044\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=222044"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=222044"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=222044"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}