Sub Company Sells All Its Output at 20 Percent Above

question 9

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 consolidated net income for 2006?

• A)$357,500
• B)$375,000
• C)$490,000
• D)$317,750

---

Definitions:

Speculation

The act of making high-risk investments or assumptions with the potential for significant gain, typically based on anticipated market movements.

Emergent Thinking

Emergent thinking refers to the process of developing new and innovative ideas through the interaction and combination of existing thoughts and knowledge.

Testing Effect

The phenomenon where taking a test on material enhances future retrieval of that material more effectively than spending the same amount of time studying.

SQ3R Method

A study technique focusing on five steps: Survey, Question, Read, Recite, and Review to improve comprehension and retention of information.