Sub Company Sells All Its Output at 20 Percent Above

question 38

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 noncontrolling interest for 2008?

• A)$39,750
• B)$37,875
• C)$71,275
• D)$70,875

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Definitions:

Soft Drinks

Beverages that do not contain alcohol, typically carbonated and containing flavors or sweeteners.

Market Share

The percentage of an industry's total sales that is earned by a particular company over a specified time period.

Introductory Stage

The first phase in a product's life cycle, involving product launch and initial market penetration.

Product Line

refers to a series of related products offered by a company under a single brand.