Sub Company Sells All Its Output at 20 Percent Above

question 2

Multiple Choice

Sub Company sells all its output at 20 percent above cost to Par Corporation.Par purchases all its inventory from Sub.The incomes reported by the companies over the past three years are as follows:
Sub Company sold inventory for $300,000,$262,500 and $337,500 in the years 2006,2007,and 2008 respectively.Par Company reported ending inventory of $105,000,$157,500 and $180,000 for 2006,2007,and 2008 respectively.Par acquired 70 percent of the ownership of Sub on January 1,2006,at underlying book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

-Based on the information given above,what will be the income to controlling interest for 2008?

• A)$615,375
• B)$686,250
• C)$690,000
• D)$694,000

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Definitions:

Exact Interest

This refers to the method of calculating interest based on a 365-day year or actual number of days in a month, providing a precise interest calculation.

Simple Interest

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Exact Interest

A redefined term referring to the method of calculating interest based on a 365-day year, highlighting the precision in financial computations.

365-Day Year

A calendar year consisting of 365 days, not accounting for leap years which have 366 days.