Pen Corporation sold machinery to its 80 percent owned subsidiary, Sam Corporation, for $100,000 on December 31, 2011. The cost of the machinery to Pen was $80,000, the book value at the time of sale was $60,000, and the machinery had a remaining useful life of five years.
How will the intercompany sale affect Pen’s income from Sam and Pen’s net income for 2011?
|
Pen’s Income from Sam |
Pen’s Net Income |
|
|
a |
No effect |
No effect |
|
b |
Increased |
No effect |
|
c |
Decreased |
No effect |
|
d |
No effect |
Decreased |