1. Pat Corporation owns 70 percent of Sue Company’s common stock, acquired January 1, 2012. Patents from the investment are being amortized at a rate of $20,000 per year. Sue regularly sells merchandise to Pat at 150 percent of Sue’s cost. Pat’s December 31, 2012, and 2013 inventories include goods purchased intercompany of $112,500 and $33,000, respectively. The separate incomes (do not include investment income) of Pat and Sue for 2013 are summarized as follows:
Total consolidated income should be allocated to controlling and noncontrolling interest shares in the amounts of:
a. $344,550 and $61,950, respectively
b. $358,550 and $60,000, respectively
c. $346,500 and $60,000, respectively
d. $346,500 and $67,950, respectively
2. Pac acquired a 60 percent interest in Slo on January 1, 2011, for $360,000, when Slo’s net assets had a book value and fair value of $600,000. During 2011, Pac sold inventory items that cost $600,000 to Slo for $800,000, and Slo’s inventory at December 31, 2011, included one fourth of this merchandise. Pac reported separate income from its own operations (excludes investment income) of $300,000, and Slo reported a net loss of $150,000 for 2011. Controlling share of consolidated net income for Pac Corporation and Subsidiary for 2011 is:
a. $260,000
b. $180,000
c. $160,000
d. $100,000
3. San Corporation, a 75 percent owned subsidiary of Par Corporation, sells inventory items to its parent at 125 percent of cost. Inventories of the two affiliates for 2011 are as follows:
Par’s beginning and ending inventories include merchandise acquired from San of $150,000 and $200,000, respectively, which is sold in the following year. If San reports net income of $300,000 for 2011, Par’s income from San will be:
a. $255,000
b. $217,500
c. $215,000
d.$195,000
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