Intercompany Sale of Inventory. Use the following information for the next 3 questions. On January 1, 20x4, Dad Co. bought 70% of the common shares of Son Co. for $200. On that date, the book value of Son Co. was $100. With one exception, all assets and liabilities of Son Co. had book values approximately equal to their market values. The excess applies to machinery with remaining life 10 years.

During 20x6, Dad sold goods to Son for $500. At the end of the year, Son still had some of these goods. Dads profit on the goods still held by Son was $40.

There were no intercompany sales prior to 20x6. Sons book value was $120 on January 1, 20x6. During 20x6, Son earned $120 and paid $20 in dividends. Sons book value was $220 at the end of 20x6.

6. Dad's Investment in Son account at the end of 20x6 (3 years after the acquisition):

a. $205.

b. $225.

c. $260.

d. $265.

e. None of above.

7. For 20x6 the working paper adjustments to the cost of goods sold relating only to the intercompany sale is:

a. $440.

b. $460.

c. $480.

d. $500.

e. None of the above.

8. The ending Noncontrolling Interest account balance (at the end of 20x6) is:

a. $22.

b. $66.

c. $101.

d. $105.

e. None of the above.