On January 1, 2004, Par Corporation acquired 60 percent of the voting common shares of Sue Corporation at an excess of fair value over book value of $1,000,000. This excess was attributed to plant assets with a remaining useful life of five years. For the year ended December 31, 2011, Sue prepared condensed financial statements as follows (in thousands):
Condensed Balance Sheet at December 31, 2011
Current assets (except inventory) .............................. $ 600
Inventories .......................................................... 300
Plant assets-net ................................................. 5,000
Total assets ...................................................... $5,900
Liabilities ......................................................... $ 400
Capital stock ..................................................... 3,400
Retained earnings ............................................... 2,100
Total equities ................................................... $5,900
Condensed Statement of Income and Retained Earnings
Sales ............................................................ $1,000
Cost of sales .................................................... (500)
Other expenses ................................................. (300)
Net income ....................................................... 200
Add: Retained earnings January 1, 2011 .................. 2,000
Less: Dividends .................................................. 100
Retained earnings December 31, 2011 .................... $2,100
Sue regularly sells inventory items to Par at a price of 120 percent of cost. In 2010 and 2011, sales from Sue to Par are as follows:
2010 2011
Sales at selling price ...................................... $840 ............ $960
Inventory unsold by Par on December 31 .............. 120 .............. 360
1. Under the equity method, Par reports investment income from Sue for 2011 of:
a. $120
b. $96
c. $80
d. $104 loss
2. Noncontrolling interest on December 31, 2011, is:
a. $2,200
b. $2,184
c. $2,176
d. $2,140
3. On the books of Par Corporation, the investment account is properly reflected on December 31, 2011, at:
a. $3,240
b. $3,264
c. $3,276
d. Not enough information is given.