Pinata Corporation Acquired an 80% Interest in Smackem Inc

question 32

Multiple Choice

Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2011,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2011.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2011,are shown below. Smackem's separate income statement must have reported net income of

• A)$13,750.
• B)$14,750.
• C)$15,750.
• D)$15,250.

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Definitions:

Rising Incomes

An economic condition where individuals or populations experience an increase in their disposable income, often leading to changes in spending habits and economic growth.

Cost of Lumber

The expense associated with purchasing wood used for construction and manufacturing, which can vary based on supply and demand.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various price levels at a given point in time.

Supply

The total amount of a good or service available for purchase at any given price level within a defined market.