1) P Corporation acquired an 80% interest in S Corporation two years ago at an implied value...
Question:
1) P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2017, S sold equipment with a five-year remaining life to P for a gain of $180,000. S reports net income of $900,000 for 2017 and pays dividends of $300,000. P’s Equity from Subsidiary Income for 2017 is:
a) $720,000.
b) $576,000.
c) $604,800.
d) $864,000
2) P Company purchased land from its 80% owned subsidiary at a cost of $30,000 greater than it subsidiary’s book value. Two years later P sold the land to an outside entity for $15,000 more than P’s cost. In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of:
a) $15,000.
b) $36,000.
c) $39,000.
d) $45,000.
3) On January 1, 2016, P Corporation sold equipment with a 3-year remaining life and a book value of $100,000 to its 70% owned subsidiary for a price of $115,000. In the consolidated workpapers for the year ended December 31, 2017, an elimination entry for this transaction will include a:
a) Debit to Equipment for $15,000.
b) Debit to Gain on Sale of Equipment for $15,000.
c) Credit to Depreciation Expense for $15,000.
d) Debit to Accumulated Depreciation for $10,000.
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak