Reverse Analysis: Equipment Transfer — Downstream In preparing consolidated statements for the year ended 12/31/05, a debit was made to Depreciation Expense for $2,000. This entry was nec¬

essary because of a downstream equipment transfer made on 7/3/05 between Fyna Inc. and its 100%-owned subsidiary, Syna Inc. This $2,000 entry was an adjustment to the $5,500 of depre¬

ciation expense on this equipment that Syna reported for 2005. On 7/3/05 the equipment was 62.5% depreciated and had a 3-year remaining life. Syna estimated that the equipment would last 5 years.

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

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