During 2019, Y Company a 90% owned subsidiary sold inventory to its parent, X Company, for $1,000,000 at a 25% mark-up on cost. 30% of this inventory remained in X’s inventory at December 31st. 2019. Both companies have a tax rate of 40% and a December 31st. year end. What adjustment will be needed to arrive at X’s consolidated inventory for the year ended December 3st. 2019?

a. A deduction of $75,000

b. A deduction of $60,000

c. A deduction of $36,000

d. A deduction of $45,000.

i. What adjustment will be made to consolidated net income in 2019?

a. An addition of $60,,000

b. An addition of $36,000

c. A deduction $60,000

d. A deduction of $36,000.

ii. The X Company acquires the Y Company’s common shares for cash. On the date of acquisition, Y had Goodwill of $100,000 on its books. Which of the following statements regarding Y’s Goodwill on the date of acquisition is correct?

a. Y’s goodwill is considered an identifiable asset and should therefore be included in Parent Company’s Purchas Price Discrepancy calculation.

b. Y’s goodwill is considered an identifiable asset and should therefore be excluded from the Parent Company’s Purchase Price Discrepancy calculation.

c. Y’s goodwill is not considered an identifiable asset and should therefore be excluded from Parent Company’s Purchase Price Discrepancy calculation.

d. Y’s goodwill is not considered an identifiable asset and should therefore be included in Parent Company’s Purchase Price Discrepancy calculation.

Answer rating: 100% (QA)

Answer 1 Option B Deduction of 60000 Calculation 1000000 x 30 x 25 125 6000... View the full answer