Reference no: EM133137638

Question - James Inc. has owned 80 percent of Ted Limited for many years. On January 1, Year 6, James paid Ted $580,000 to acquire equipment that Ted had purchased on January 1, Year 4, for $634,000. The equipment is expected to have no scrap value and is depreciated over a 15-year useful life. Neither company owns any other equipment.

James reported net income of $84,000 for Year 8 and paid dividends of $54,000. Ted reported net income of $74,000 and paid dividends of $32,000 in Year 8.

Required -

(a) What amounts should be reported on james separate entity financial statements for Year 8 for equipment, accumulated depreciation, depreciation expense and gain on sale of equipment?

(b) What amounts should be reported on the Year 8 consolidated statements for equipment, accumulated depreciation and depreciation expense?

(c) Compute the amount reported as consolidated net income for Year 8. Ignore income taxes.