Question

pepper company completely owns salt inc. on january 2, 2022 pepper sold salt machinery at its carrying amount of $30,000. pepper had the machinery two years before selling it and used a five-year straight-line depreciation method, with no residual value. salt will use a three-year straight-line method. in the 2022 consolidated income statement, the depreciation expense multiple choice needed no adjustment. decreased by $4,000. increased by $4,000. increased by $30,000.

Answer 1

The depreciation expense on the consolidated income statement remains the same and does not change.

Step-by-step explanation:

The subject of this question is Business and it is at a College level.

In this scenario, Pepper Company sold Salt Inc.'s machinery at its carrying amount of $30,000. Pepper had used the machinery for two years and had already depreciated it using a five-year straight-line method.

Salt Inc. will now use a three-year straight-line depreciation method.

Since the machinery was sold, it no longer appears on Pepper's consolidated income statement and therefore, there is no depreciation expense adjustment needed.

As a result, the depreciation expense on the consolidated income statement remains the same and does not change.