On January 1, 2011, Pride, Inc

question 20

Multiple Choice

On January 1, 2011, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill which has not been impaired. As of December 31, 2011, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2011, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of this purchase had been paid for by Strong by the end of the year. 60% of these goods were still in the company's possession on December 31.
What is the consolidated total for equipment (net) at December 31, 2011?

• A) $952,000.
• B) $1,058,400.
• C) $1,069,600.
• D) $1,064,000.
• E) $1,066,800.

---

Definitions:

GAAP

Generally Accepted Accounting Principles, which are a collection of commonly followed accounting rules and standards for financial reporting.

Quarterly Income

The net income earned by a company during a three-month period, typically reported in quarterly financial statements.

Operating Segments

Components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker.

Financial Reporting

The process of disclosing financial results and related information to stakeholders and the public, typically through formal documents.