Use the following information to answer the question(s)below.
Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1,2012,when the book values of Shenley's assets and liabilities were equal to their fair values.The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets.During 2012,Pouch sold merchandise that cost $70,000 to Shenley for $86,000.On December 31,2012,three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory.Separate incomes (investment income not included)of the two companies are as follows:

-What is Pouch's income from Shenley for 2012?
A)$27,200
B)$29,600
C)$39,200
D)$49,000

Question

Use the following information to answer the question(s)below.
Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1,2012,when the book values of Shenley's assets and liabilities were equal to their fair values.The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets.During 2012,Pouch sold merchandise that cost $70,000 to Shenley for $86,000.On December 31,2012,three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory.Separate incomes (investment income not included)of the two companies are as follows:
 
-What is Pouch's income from Shenley for 2012?
A)$27,200 
B)$29,600 
C)$39,200 
D)$49,000

Quizplus · Accepted Answer

A)($49,000 × 80%)- $12,000 = $27,200

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