Phelps Co Uses the Sophisticated Equity Method to Account for the the 80

question 2

Multiple Choice

Phelps Co. uses the sophisticated equity method to account for the 80% investment in its subsidiary Shore Corp. At the time of the acquisition, the fair values of the net asset required approximated their book values. Based upon the following information, what amount does Phelps Co. record as subsidiary income?

• A)$50,000
• B)$44,000
• C)$40,000
• D)$36,000

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Definitions:

Schedule Of Cash Collections

A detailed plan that shows when a company expects to receive cash from accounts receivable or other revenue sources.

Direct Labor Budget

A direct labor budget is a financial plan that estimates the total cost of direct labor required to meet the production needs of a business.

Direct Labor-hours

The total hours worked directly on the production of goods.

Merchandise Purchases Budget

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period.