Reference no: EM132805924

Questions -

Q1. S Company sells all its output at 20 percent above cost to P Corporation. P Co. purchases all its inventory from S Co.. The incomes reported by the companies over the past three years are as follows:

S Company sold inventory for P420,000, P300,000 and P320,000 in the years 2018, 2019, and 2020 respectively. P Company reported ending inventory of P120,000, P180,000 and P160,000 for 2018, 2019, and 2010 respectively. P Co. acquired 70 percent of the ownership of S Co. on January 1, 2018, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of S Company

Based on the information given above, what will be the consolidated net income for 2019?

a. 495,000

b. 475,000

c. 485,000

d. 447,500

Q2. Fair Company issued 12,000 shares of its P20 par value common stock for the net assets of Field Company in a business combination under which Field Co. will be merged into Fair Co. On the date of the combination, Fair Co. common stock had a fair value of P30 per share. Balance sheets for Fair Co. and Field Co. immediately prior to the combination were as follows:

If the business combination is treated as an acquisition and Field Company's net assets have a fair value of P343,200, Fair Company's balance sheet immediately after the combination will include goodwill of:

a. 43,200

b. 4,800

c. 16,800

d. no goodwill

Q3. On January 1, 2020 Forest Co. recorded a P30,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The effect of this transaction on the amount recorded in 2020 by the parent company Will as its investment income in the Forest was

a. a decrease of P27,000 if the Forest was 90% owned

b. a decrease of P18,000 if the Forest was 80% owned.

c. an increase of P22,500 if the Forest was wholly owned.

d. an increase of P30,000 if the Forest was wholly owned.

Q4. On January 1, 2005 Rainforest Co. recorded a $30,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The effect of this transaction on the amount recorded in 2005 by the parent company Wompoo as its investment income in the Rainforest was

a. a decrease of $18,000 if the Rainforest was 80% owned.

b. a decrease of $27,000 if the Rainforest was 90% owned.

c. an increase of $22,500 if the Rainforest was wholly owned.

d. an increase of $30,000 if the Rainforest was wholly owned.