Final answer:
To find the consolidated total for equipment (net), we calculate the book value of the building at the time of sale, adjust for the intra-group gain, and then compute the depreciation. The final net book value of the building is then added to the current consolidated equipment total, which is not provided in the question. With missing information, we cannot determine the correct answer choice.
Step-by-step explanation:
To solve this question, we must first calculate the book value of the building at the time of sale from Thomson to Stayer. Thomson acquired the building on January 1, 2016, for $460,000 with a 10-year life and no salvage value. This means Thomson would depreciate the building by $46,000 per year ($460,000 / 10 years). After two years, on January 1, 2018, the accumulated depreciation would be $92,000 (2 years * $46,000/year), making the book value of the building $368,000 ($460,000 - $92,000).
Thomson sold the building to Stayer for $430,400 when the book value was $368,000. This results in a gain of $62,400 ($430,400 - $368,000). Since Thomson and Stayer are related parties, this intra-group gain must be eliminated in the consolidated financial statements. When consolidating, we should record the building at its original cost to Thomson, and continue depreciating it as if no sale had taken place. As for the remaining life of the building, since it was 8 years at the time of sale, it would now be 7 years at December 31, 2018. Therefore, the depreciation expense for each of those years would still be $46,000. The accumulated depreciation for the three years would be $138,000 (3 years * $46,000/year). Thus, the net book value of the building on the consolidated balance sheet would be $322,000 ($460,000 - $138,000). If the consolidated total for equipment (net) before considering the building was $740,000, adding the net book value of the building would give us $740,000 + $322,000 = $1,062,000. However, this is not one of the answer choices provided, indicating some sort of discrepancy. Without additional information, we cannot definitively determine which of the answer choices is correct.