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

question 5

Multiple Choice

Use the following information to answer the question(s) below.

Pew Corporation acquired 80% ownership of Sordid Incorporated, at a time when Pew's investment cost was equal to 80% of Sordid's book value. At the time of acquisition, the book values and fair values of Sordid's assets and liabilities were equal. Pew uses the equity method. During 2014, Pew sold goods to Sordid for $160,000 making a gross profit percentage of 20%. Half of these goods remained unsold in Sordid's inventory at the end of the year. Income statement information for Pew and Sordid for 2014 were as follows:


-The 2014 consolidated income statement showed noncontrolling interest share of

• A)$3,200.
• B)$6,400.
• C)$8,800.
• D)$12,000.

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Definitions:

CCA Class

A classification system used in Canadian tax law for the depreciation of property, plant, and equipment for tax purposes.

Pre-Tax Cost

The expense of an investment or project before accounting for taxes; it reflects the gross cost.

Net Advantage

An evaluation metric that identifies the benefits minus the costs of pursuing a specific action or investment.

Depreciation Tax Shield

A tax reduction achieved through deducting depreciation expenses, lowering taxable income.