On January 1, 2011, Musial Corp

question 117

Essay

On January 1, 2011, Musial Corp. sold equipment to Matin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.
Musial earned $308,000 in net income in 2011 (not including any investment income) while Matin reported $126,000. Assume there is no amortization related to the original investment.
-Assuming that Musial owned only 90% of Matin, what is consolidated net income for 2009?

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Definitions:

Market Price

The contemporary market value at which a service or asset is accessible for sale or purchase.

Perfect Competition

A market structure characterized by a large number of small firms, homogeneous products, and free entry and exit, making firms price takers.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the average cost of producing each unit of output.

Profit Maximization

The process by which a firm determines the price and output level that returns the greatest profit, considering costs and market demand.