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Ch 5 Multiple Choice Questions

Ch 5 Multiple Choice Questions - Multiple Choice Questions...

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Multiple Choice Questions 1. Redstone owns 60% of Granite Co.’s outstanding common stock. Redstone reports cost of goods sold in 2011 of $1,400,000 while Granite Co. reports $460,000. During 2011, Redstone sold inventory costing $250,000 to Granite Co. for $400,000. 30% of these goods are not resold by Granite Co. until the following year. What is consolidated cost of goods sold ? A. $1,860,000 B. $1,460,000 C. $1,505,000 D. $1,415,000 E. $1,721,000 2. McKnight Inc. owns 80% of Horse Co.’s common stock. On January 2, 2011, McKnight Inc. sold Horse Co. some equipment for $640,000. The equipment had a carrying amount of $400,000. At the acquisition date, the equipment has a remaining useful life of 8 years. Horse Co. uses the straight- line method. The net adjustments to calculate 2011 and 2012 consolidated net income would be an increase (decrease) of 2011 2012 Items 3 through 7 are based on the following information. Presented below are several figures reported for Park Inc. and Masters Co. as of December 31, 2012. Park Inc. Masters Co. Inventory $ 400,000 $ 200,000 Sales 900,000 500,000 Cost of Goods Sold 300,000 180,000 Expenses 180 ,000 140 ,000 Park Inc. acquired 75% of Masters Co.’s outstanding common stock on January 1, 2011. Land use rights valued at $281,250 were owned by Masters Co. and should be amortized over twenty years. During 2011, Masters sold Park inventory costing $80,000 for $100,000. 30% of this inventory was not sold to external parties until 2012. During 2012, Masters sold inventory costing $l00,000 to Park for $150,000. Of this inventory, 25 % remained unsold on December 31, 2012.
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