1. Son Corporation is an 80 percent-owned subsidiary of Pop Corporation. In 2016, Son sold land that cost $15,000 to Pop for $25,000. Pop held the land for eight years before reselling it in 2024 to Roy Company, an unrelated entity, for $55,000. The 2024 consolidated income statement for Pop and its subsidiary, Son, will show a gain on the sale of land of:
a. $40,000
b. $32,000
c. $30,000
d. $24,000
2. On January 3, 2016, Pop Corporation sells equipment with a book value of $90,000 to its 100 percent-owned subsidiary, Son Corporation, for $120,000. The equipment has a remaining useful life of three years with no salvage at the time of transfer. Son uses the straight-line method of depreciation. As a result of this intercompany transaction, Pop's Investment in Son account balance at December 31, 2016, will be:
a. $20,000 greater than its underlying equity interest
b. $20,000 less than its underlying equity interest
c. $30,000 less than its underlying equity interest
d. $10,000 greater than its underlying equity interest
3. Pop Corporation sells equipment with a book value of $80,000 to Son Company, its 75 percent-owned subsidiary, for $100,000 on January 1, 2016. Son determines that the remaining useful life of the equipment is four years and that straight-line depreciation is appropriate. The December 31, 2016, separate financial statements of Pop and Son show equipment-net of $500,000 and $300,000, respectively. Consolidated equipment-net will be:
a. $800,000
b. $785,000
c. $780,000
d. $650,000
4. Pop Corporation sold equipment with a remaining three-year useful life and a book value of $14,500 to its 80 percent-owned subsidiary, Son Corporation, for $16,000 on January 2, 2016. A consolidated workpaper entry on December 31, 2016, to eliminate the unrealized profits from the intercompany sale of equipment will include:
a. A debit to gain on sale of equipment for $1,000
b. A debit to gain on sale of equipment for $1,500
c. A credit to depreciation expense for $1,500
d. A debit to machinery for $1,500
5. Son Company, a subsidiary, sells equipment with a four-year remaining useful life to Pop Corporation at a $12,000 gain on January 1, 2016. The effect of this intercompany transaction on the Pop's investment income from Son for 2016 will be:
a. An increase of $12,000 if Son is 100% owned
b. An increase of $9,000 if Son is 100% owned
c. A decrease of $9,000 if Son is 100% owned
d. A decrease of $3,600 if Son is 60% owned
6. On January 1, 2016, Son Corporation, a 60 percent-owned subsidiary of Pop Company, sells a building with a book value of $300,000 to Pop for $350,000. At the time of sale, the building has an estimated remaining life of 10 years with no salvage value. Pop uses straight-line depreciation. If Son reports net income of $1,000,000 for 2016, noncontrolling interest share will be:
a. $450,000
b. $400,000
c. $382,000
d. $355,000