1. The separate incomes of Pop Corporation and Son Corporation, a 100 percent-owned subsidiary of Pop, for 2017 are $2,000 and $1,000, respectively. Pop sells all of its output to Son at 150 percent of Pop's cost of production. During 2016 and 2017, Pop's sales to Son were $9,000 and $7,000, respectively. Son's inventory at December 31, 2016, included $3,000 of the merchandise acquired from Pop, and its December 31, 2017, inventory included $2,400 of such merchandise. Assume Son sells the inventory purchased from Pop in the following year. A consolidated income statement for Pop Corporation and Subsidiary for 2017 should show controlling interest share of consolidated net income of:
a. $2,200
b. $2,800
c. $3,000
d. $3,200
Pam Corporation owns 75 percent of the voting common stock of Sun Corporation, acquired at book value during 2016. Selected information from the accounts of Pam and Sun for 2017 are as follows:
______________ Pam ____________ Sun
Sales ............. $ 1,800 .............. $1,000
Cost of sales ......... 980 ................. 380
During 2017 Pam sold merchandise to Sun for $100, at a gross profit to Pam of $40. Half of this merchandise remained in Sun's inventory at December 31, 2017. Sun's December 31, 2016, inventory included unrealized profit of $8 on goods acquired from Pam.
2. In a consolidated income statement for Pam Corporation and Subsidiary for the year 2017, consolidated sales should be:
a. $2,900
b. $2,800
c. $2,725
d. $2,700
3. In a consolidated income statement for Pam Corporation and Subsidiary for the year 2017, consolidated cost of sales should be:
a. $1,372
b. $1,360
c. $1,272
d. $1,248