Use the Following Information to Answer the Question(s)below

question 14

Multiple Choice

Use the following information to answer the question(s) below.
On January 1,2010,Shrimp Corporation purchased a delivery truck with an expected useful life of five years,and a salvage value of $8,000.On January 1,2012,Shrimp sold the truck to Pacet Corporation.Pacet assumed the same salvage value and remaining life of three years used by Shrimp.Straight-line depreciation is used by both companies.On January 1,2012,Shrimp recorded the following journal entry:
Pacet holds 60% of Shrimp.Shrimp reported net income of $55,000 in 2012 and Pacet's separate net income (excludes interest in Shrimp) for 2012 was $98,000.
-Assume an upstream sale of machinery occurs on January 1,2011.The parent owns 70% of the subsidiary.There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value.Straight-line depreciation is used.Which of the following statements is correct?

• A)Noncontrolling interest share for 2011 is equal to: subsidiary income for 2011 multiplied by 30%.
• B)Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale plus the excess depreciation expense)multiplied by 30%.
• C)Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale)multiplied by 30%.
• D)Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 plus the excess depreciation expense)multiplied by 30%.

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Definitions:

High-Low Method

An accounting technique used to estimate the fixed and variable components of a cost based on the highest and lowest activity levels.

Least-Squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of the squares of the vertical distances of the points from the line.

Least-Squares Regression

A statistical method used to determine the best-fitting line through a set of points, minimizing the sum of the squares of the distances of the points from the line.

Statistical Evidence

Data collected and analyzed for the purpose of supporting a conclusion or hypothesis.