What is the net effect on consolidated net income

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On January 1, 2012, Smeder Company, an 80% owned subsidiary of Collins, Inc. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2012 and 2013, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. What is the net effect on consolidated net income in 2012 due to the equipment transfer? Increase $2,000. Increase $10,000. Decrease $10,000. Decrease $12,000. Decrease $14,000.

Reference no: EM132015986

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