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

question 45

Multiple Choice

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

Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2014, when the book values of Shenley's assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets. During 2014, Pouch sold merchandise that cost $70,000 to Shenley for $86,000. On December 31, 2014, three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory. Separate incomes (investment income not included) of the two companies are as follows:


-What is Pouch's income from Shenley for 2014?

• A)$27,200
• B)$29,600
• C)$39,200
• D)$49,000

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Definitions:

Internal Controls

Internal controls are processes and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Independent Accounting Firms

External organizations specializing in auditing, tax, and advisory services to ensure financial statements' accuracy and compliance with regulatory standards.

Collusion

An agreement between two or more parties, often secretly, to limit open competition by deceiving, misleading, or defrauding others of their legal rights.

Fraud Prevention

Strategies and measures employed by organizations to detect, prevent, and protect against fraudulent activities or financial irregularities.