Portia Ltd

question 36

Multiple Choice

Portia Ltd.acquired 80% of Siro Ltd.on December 31,20X0.At the date of acquisition,Siro's net assets totalled $15,000.Portia uses the cost method to record the acquisition.At December 31,20X1,the separate-entity financial statements showed the following:

During 20X1,Siro sold $7,000 of goods,with a gross margin of 40%,to Portia.At the end of 20X1,$3,000 of the goods were still in Portia's inventory.What portion of consolidated net income for 20X1 is attributable to Portia?

• A)$6,120
• B)$6,240
• C)$6,600
• D)$7,080

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Definitions:

Productive Land Resources

Refers to natural resources that can be used for production purposes, such as agriculture, mining, and forestry.

Perfectly Inelastic

Describes a situation in economics where the quantity demanded or supplied does not change in response to a price change.

Perfectly Inelastic

A market condition where the quantity demanded or supplied is unresponsive to price changes, depicted graphically as a vertical line.

Supply

The total amount of a product or service available for purchase at any given price level.