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Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1,...

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Accounting

Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2016, Thomson acquired a building with a 10-year life for $320,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2018, Thomson sold this building to Stayer for $315,200. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2018, how does this transfer affect the computation of consolidated net income?

Multiple Choice

  • Net income is reduced by $59,200.

  • Net income is reduced by $66,600.

  • Net income is reduced by $51,800.

  • Net income is reduced by $58,720.

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