11 (1 point) Listen On June 30, 2018, Parent Company sold some land to its subsidiary for $240,000. The land had cost Parent Company $120,000 when it was acquired three years previously. On June 30, 2020, the subsidiary sold the land to an outside party for $275,000. Parent Company owns 75% of the outstanding shares of its subsidiary and accounts for its investment using the cost method. What effect will the adjustment for the realization of the intercompany gain (in the preparation of the consolidated income statement) have on the non-controlling interest in income for 2020? It will decrease the non-controlling interest in income by $8,750. O It will have no effect on the non-controlling interest in income. It will increase the non-controlling interest in income by $38,750. It will increase the non-controlling interest in income by $35,000 Question 12 (1 point) Listen LEO Inc. acquired a 60% interest in MARS Inc. on January 1, 2019 for $400,000. Unless otherwise stated, LEO uses the cost method to account for its investment in MARS Inc. On the acquisition date, MARS had common stock and retained earnings valued at $100,000 and $150,000 respectively. The acquisition differential (Fair Value Adjustment) was allocated as follows: - $80,000 to undervalued inventory; - $40,000 to undervalued equipment. (to be amortized over 20 years) The following took place during 2019: MARS reported a net income and declared dividends of $25,000 and $5,000 respectively. LEO's December 31, 2019 inventory contained an intercompany profit of $10,000 due to an intercompany sale from MARS to LEO. LEO's net income was $75,000. All intercompany sales as well as sales to outsiders are priced to provide the selling company with gross margin of 20%. The consolidated net income attributable to the NCI portion for 2019 on the Consolidated Statement of Comprehensive income would be: LEO's December 31, 2019 inventory contained an intercompany profit of $10,000 due to an intercompany sale from MARS to LEO. LEO's net income was $75,000. All intercompany sales as well as sales to outsiders are priced to provide the selling company with gross margin of 20%. The consolidated net income attributable to the NCI portion for 2019 on the Consolidated Statement of Comprehensive income would be: $6,000 $31,800 $26,800 ($26,800) Question 14 (1 point) Listen HRN Enterprises Inc. (HRN) purchases 80% of the outstanding voting shares of NHR Inc. on January 1, 2018. HRN is using the Entity method. On that date, which of the following statements pertaining to the non-controlling interest (NCI) is TRUE? HRN's non-controlling interest (NCI) account will include 20% of the book value of NHR's net assets. HRN's non-controlling interest (NCI) account will include 20% of the book value of NHR's net assets, 20% of the fair value excess and 20% of the goodwill. HRN's non-controlling interest (NCI) account will include 20% of the book value of NHR's net assets and 20% of the fair value excess. HRN's non-controlling interest (NCI) account will include 20% of the acquisition differential on the date of acquisition. Question 16 (1 point) Listen On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. Transaction Date: January 1, 2020 Year-End Date: January 31, 2020 Settlement Date: February 28, 2020 The invoice price billed by CMI was US$120,000. US $1 = CDN $1.141 US $1 = CDN $1.142 US $1 = CDN $1.145 At what value would CMI record the initial sale to its American distributor? CDN$136,920 US$120,000 CDN$137,400 CDN$120,000 Question 13 (1 point) > Listen X Inc. owns 80% of Y Inc. During 2020, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end. Y Inc. sold Inventory to X Inc. for $5,000. 40% of this inventory remained in X's warehouse at year end. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its Investment in Y Inc. Assume that Y Inc. reported a net income of $20,000 in 2020, what would be Y's adjusted net income for the year? $15,000 $18,600 $20,000 $19,600