Reference no: EM133155302

Question - Khan Inc. has owned 80 percent of Summerside Limited for many years. On January 1, Year 6, Khan paid Summerside $578,000 to acquire equipment that Summerside had purchased on January 1, Year 4, for $632,000. The equipment is expected to have no scrap value and is depreciated over a 15-year useful life. Neither company owns any other equipment.

Khan reported net income of $82,000 for Year 8 and paid dividends of $52,000. Summerside reported net income of $72,000 and paid dividends of $31,000 in Year 8.

Required -

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

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

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