On January 1, 2009, Pam Corporation acquired 60 percent of the voting common shares of Sun Corporation at an excess of fair value over book value of $1,000,000. This excess was attributed to plant assets with a remaining useful life of five years. For the year ended December 31, 2016, Sun prepared condensed financial statements as follows (in thousands):
Condensed Balance Sheet at December 31, 2016
Current assets (except inventory) ................................... $ 600
Inventories ............................................................... 300
Plant assets-net ..................................................... 5,000
Total assets ......................................................... $ 5,900
Liabilities ............................................................. $ 400
Capital stock .......................................................... 3,400
Retained earnings .................................................... 2,100
Total equities ....................................................... $5,900
Condensed Statement of Income and Retained Earnings
Sales .................................................................. $1,000
Cost of sales .......................................................... (500)
Other expenses ......................................................... (300)
Net income ................................................................ 200
Add: Retained earnings January 1, 2016 2,000
Less: Dividends ............................................................ (100)
Retained earnings December 31, 2016 .................................. $ 1,900
Sun regularly sells inventory items to Pam at a price of 120 percent of cost. In 2015 and 2016, sales from Sun to Pam are as follows:
____________________________________ 2015 _____________ 2016
Sales at selling price ............................. $840 ..................... $960
Inventory unsold by Pam on December 31 ... 120 ........................ 360
1. Under the equity method, Pam reports investment income from Sun for 2016 of:
a. $120
b. $96
c. $80
d. $104 loss
2. Non-controlling interest on December 31, 2016, is:
a. $2,200
b. $2,184
c. $2,176
d. $2,140
3. On the books of Pam Corporation, the investment account is properly reflected on December 31, 2016, at:
a. $3,240
b. $3,264
c. $3,276
d. Not enough information is given?