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:

Gandhi

Mohandas Karamchand Gandhi, an Indian lawyer, anti-colonial nationalist, and political ethicist, who led the campaign for India's independence from British rule through nonviolent resistance.

Centralized

Organized such that control, decision making, or authority is concentrated in a central location or governing body.

Political Organization

The way in which a society creates and applies laws and policies through structures, institutions, and processes.

Band

A small, nomadic, and kinship-based group of people who subsist primarily through hunting, gathering, or fishing.