Problem
Marco Towers Inc. owns 80% of Flatbush Condos Co. Five years ago on January 1, Marco Towers acquired equipment with a twenty-year life for $1,800,000. No salvage value was anticipated and the equipment was to be depreciated on the straight-line basis. Five years later on January 1, Marco Towers sold the equipment to Flatbush Condos for $1,500,000. At that time, the equipment had a remaining useful life of fifteen years, but still had no expected salvage value. In preparing financial statements for the current year when the sale was made to Flatbush, how does this transfer affect the calculation of consolidated net income?