P Company Bought 60% of the Common Stock of S

question 22

Essay

P Company bought 60% of the common stock of S Company on January 1, 2017. On January 1, 2017 there was an intercompany sale of equipment at a gain of $63,000. The equipment had an estimated remaining life of six years. Net incomes of the two companies from their own operations (including sales to affiliates) were as follows:
A. If S Company sold the equipment to P Company, fill in the following matrix: B. If P Company sold the equipment to S Company, fill in the following matrix:

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Definitions:

Product vs. Service

A comparison between tangible items (products) and intangible activities (services) offered in the market.

Chicken

A type of poultry and common domesticated fowl, widely consumed as meat and eggs across the globe.

Chef

A professional cook, often the head of a kitchen, who is responsible for preparing meals in restaurants or other establishments.

Intangibility

A characteristic of services that makes them unable to be seen, touched, or quantified before they are bought and used.