Select the correct answer for each of the following questions.

1. During 20X3, Park Corporation recorded sales of inventory for $500,000 to Small Company, its wholly owned subsidiary, on the same terms as sales made to third parties. At December 31, 20X3, Small held one-fifth of these goods in its inventory. The following information pertains to Park’s and Small’s sales for 20X3:

In its 20X3 consolidated income statement, what amount should Park report as cost of sales?
a. $1,000,000.
b. $1,060,000.
c. $1,260,000.
d. $1,500,000.
Items 2 through 6 are based on the following information:
Selected information from the separate and consolidated balance sheets and income statements of Power Inc. and its subsidiary, Spin Company, as of December 31, 20X8, and for the year then ended is as follows:

Additional Information
During 20X8, Power sold goods to Spin at the same markup that Power uses for all sales. At December 31, 20X8, Spin had not paid for all of these goods and still held 37.5 percent of them in inventory. Power acquired its interest in Spin on January 2, 20X5, when the book values and fair values of the assets and liabilities of Spin were equal, except for patents, which had a fair value of $28,000. The fair value of the noncontrolling interest was equal to a proportionate share of fair value of Spin’s net assets.
2. What was the amount of intercompany sales from Power to Spin during 20X8?
a. $3,000.
b. $6,000.
c. $29,000.
d. $32,000.
3. At December 31, 20X8, what was the amount of Spin’s payable to Power for intercompany sales?
a. $3,000.
b. $6,000.
c. $29,000.
d. $32,000.
4. In Power’s consolidated balance sheet, what was the carrying amount of the inventory that Spin purchased from Power?
a. $3,000.
b. $6,000.
c. $9,000.
d. $12,000.
5. What is the percent of noncontrolling interest ownership of Spin?
a. 10 percent.
b. 20 percent.
c. 25 percent.
d. 45 percent.
6. Over how many years has Power chosen to amortize patents?
a. 10 years.
b. 14 years.
c. 23 years.
d. 40years.

Transcribed Image Text:

Park Small $2,000,000 $1,400,000 Cost of Sales (800,000) 700,000) $1,200,000 700,000 Sales Gross Profit Power in Consolidated Balance Sheet Accounts Accounts Receivable Inventory Investment in Spin Patents NCI in NA of Spin Stockholders' Equity Income Statement Accounts 26,000 19,000 25,000 S 39,000 52,000 30,000 53,000 20,000 14,000 154,000 154,000 50,000 $200,000 $140,000 110,000 50,000 30,000 $308,000 231,000 S 77,000 Cost of Goods Sold 150,000 Gross Profit Income from Spin Amortization of Patents Net Income 7,400 2,000 40,000 33,000 15,000