Reverse Analysis: Equipment Transfer — Downstream In preparing consolidated statements for the year ended 12/31/05, a credit was made to Depreciation Expense for $3,000. This entry was nec¬

essary because of a downstream equipment transfer made on 4/1/05 between Fyre Inc. and its 100%-owned subsidiary, Syre Inc. This $3,000 entry was an adjustment to the $18,000 of depre¬

ciation expense that Syre reported on this equipment for 2005. On 4/1/05 the equipment was 20%

depreciated and had an 8-year remaining life. Syre estimated that the equipment would last only 4 years.

1. Calculate the intercompany gain or loss on the transfer.

2. Calculate Fyre’s historical cost and carrying value at the transfer date.