Depreciable asset upstream sale On April 1, 2014, Maiba Ltd. purchased a vehicle from its 80 percent-owned subsidiaries, Japera Ltd., for $2,800,000. At the time, the vehicle had a book value of $2,300,000 with accumulated depreciation of $200,000. Maiba Ltd. used a double-declining method balance to depreciate its vehicle. At the time of purchase, the vehicle had an estimated remaining useful life of 10 years with no residual value. In 2014, Japera Ltd. reported a net income of $3,800,000. Assume the book value of Japera Ltd.’s net assets was equal to fair value at the date of acquisition.

REQUIRED

1. Calculate depreciation expenses related to the vehicle that should be eliminated in preparing the consolidated financial statement for 2014.

2. Calculate income from Japera Ltd. in 2014.

Answer rating: 100% (QA)

Requirement 1 Depreciation expenses that should be reported on the consolidated ... View the full answer