On Jan 1, 2010, Smeder company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net incomve of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.
1. Compute Collin's share of Smeder's net income for 2010.
A. $12,400
B. $12,800
C. $18,000
D. $14,400
2. Compute Collin's share of Smeder's net income for 2011.
A. $27,600
B. $24,000
C. $34,000
D. $27,200