Final answer:
The total of consolidated expenses for the building after Thomson sold it to Stayer would be the annual depreciation of $46,000, with no effect from the sale overstatement since it is an intercompany transaction.
Step-by-step explanation:
To determine the consolidated expenses related to the building after it was sold by Thomson to Stayer, we need to calculate the depreciation expense before the sale and after the sale considering the intercompany transaction.
Thomson acquired the building for $460,000 with a 10-year life and no salvage value, meaning the annual depreciation is $460,000 / 10 = $46,000.
After 2 years (by January 1, 2018), Thomson would have recorded $46,000 x 2 = $92,000 in depreciation. The book value of the building at the time of the sale to Stayer would be $460,000 - $92,000 = $368,000. Stayer bought the building for $430,400, resulting in a downstream sale with an overstatement in the consolidated financial statements.
Since the building was sold to Stayer with a remaining life of eight years, annual depreciation expense in the consolidated financial statements should now be $368,000 / 8 = $46,000.
The total of consolidated expenses includes both the depreciation expense for the year and the effect of the excess sale price over the book value. However, since the sale is between companies under common control, the excess amount ($430,400 - $368,000 = $62,400) should be eliminated and not considered a profit for consolidation purposes. Therefore, the annual depreciation remains at $46,000.