Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000.

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.
On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon’s income and dividends:
                                                                           2012             2013              2014

 Net Income                                                100,000          120,000         130,000

Dividends                                                       40,000           50,000           60,000

 Compute the amortization of gain through a depreciation adjustment for 2014 for consolidation purposes.

$7,000.

$1,500.

$2,000.

$1,825.

$1,925.

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