West Corp Owned 70% of the Voting Common Stock of East

question 92

Multiple Choice

West Corp. owned 70% of the voting common stock of East Co. East owned 60% of Compass Co. West and East both used the initial value method to account for their investments. The following information was available from the financial statements and records of the three companies: Operating income included unrealized intra-entity gains (which are related to inventory transfers) but did not include dividend income from investment in subsidiary. The accrual-based income of West Corp. is calculated to be

• A) $734,000.
• B) $1,261,000.
• C) $1,123,900.
• D) $1,140,700.
• E) $1,149,700.

Analyze how profits and losses are shared in partnerships and the effects of these divisions on capital accounts.

Determine the effects of changes in partnership (admission and withdrawal of partners) on capital accounts and partnership valuation.

Calculate partnership equity and understand the implications of partnership agreements on these calculations.

Apply the concept of goodwill and the bonus method in partnership accounting.