Plum Inc Acquired 90% of the Capital Stock of Sterling Co

question 36

Multiple Choice

Plum Inc. acquired 90% of the capital stock of Sterling Co. on 1/1/X1 at a cost of $540,000. On this date Sterling had equipment (10-year life) carried at $200,000 under market and total equity amounting to $350,000.
On 1/1/X1 Sterling acquired 5% (10,000 shares) of Plum's outstanding common stock for $3 per share. Internally generated net income was $50,000 for Plum and $40,000 for Sterling.
Consolidated net income for 20X2 is

• A)$90,000
• B)$86,000
• C)$83,500
• D)$70,000

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