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Port, Inc. owns 100% of Salem Inc. On January 1, Year 1, Port sold Salem delivery equipment at a gain. Port had owned the equipment for two years and used a five-year straight-line depreciation rate with no residual value. Salem is using a three-year straight-line depreciation rate with no residual value for the equipment. In the consolidated income statement, Salem’s recorded depreciation expense on the equipment for Year 1 will be decreased by:
a. 50% of the gain on sale.
b. 20% of the gain on sale.
c. 33 1/3% of the gain on sale.
d. 100% of the gain on sale.
c is the answer, how…
thanks in advance
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