Pat Corporation acquired 80 percent of Smack Corporation's voting common stock on January 1, 20X7. On December 31, 20X8, Pat received $390,000 from Smack for equipment Pat had purchased on January 1, 20X5, for $400,000. The equipment is expected to have a 10-year useful life and no salvage value. Both companies depreciate equipment on a straight-line basis.Based on the preceding information, in the preparation of consolidation entries related to the equipment transfer for the 20X9 consolidated financial statements, the net effect on accumulated depreciation will be:
A. a decrease of $135,000.
B. an increase of $135,000.
C. an increase of $160,000.
D. a decrease of $160,000.
Answer: B
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