An Acquisition Requires Revaluation of a Subsidiary's Date-Of-Acquisition Plant Assets

Multiple Choice

An acquisition requires revaluation of a subsidiary's date-of-acquisition plant assets from a book value of $40 million to a fair value of $25 million. The plant assets have a 10-year remaining life at the date of acquisition. Which statement is true concerning the eliminating entries for this revaluation?

A) In the second year following acquisition, eliminating entry (O) reduces depreciation expense by $1.5 million.
B) In the third year following acquisition, eliminating entry (R) increases plant assets by $3 million.
C) In the first year following acquisition, the net effect of eliminating entries (R) and (O) is to reduce plant assets by $15 million.
D) In the second year following acquisition, eliminating entry (R) reduces plant assets by $3 million.