Parent company (P Co) paid $180,000 to acquire 60% interest in Subsidiary (S Co) when the share capital of S was $110,000 and its retained earnings was $100,000. At the date of acquisition (January 1 2015), the excess of fair value over book values of S Co were $50,000, which were caused by an undervalued fixed asset. The fair value of non-controlling interests as at the date of acquisition was $114,000. On December 31 2019, retained earnings of S was $210,000 and share capital remain unchanged since acquisition date. Tax rate is 20%. On acquisition date, the amount of goodwill based on parent theory is:

Select one:

a. $34,000

b. $14,000

c. $44,000

d. $30,000

P Co completed the purchase of 55% of X Co from A Co, the existing owner of X Co. The following expenditures by P Co relation to the acquisition:

Payment to consultants to conduct due diligence checks	$250,000
Shares issued by P Co to A Co	4,800,000
Fair value per share of P Co at date of share issue	$1.80
Salary of Business Development Manager of P Co for June 20x5	$24,000
Travelling expenses incurred by the Manager related to the acquisition of X Co	$13,000
Undiscounted cash payment payable to A Co at the end of 3 years	$800,000
Interest payable to A Co for deferred payment	5%
Assumption of the short-term liabilities of the A Co	$180,000
Legal fees to execute sales agreement with A Co	$28,000
Stamp duties and other incidentals of share issue to A Co	$9,000

The acquisition-related costs total:

Select one:

a. $278,000

b. $324,000

c. $302,000

d. $74,000

P Co. purchases all the common stock of S Co. On January 1, 2010, P Co sells a machine to S Co. and recognize a profit of $5,000. Subsidiary uses straight-line depreciation and intends to use the machine for five years. How should this profit be reflected in the consolidated financial statements?

Select one:

a. Be recognized in its entirety in the year of sale

b. Be recognized over five years

c. Not be recorded

d. Be recognized only when the fixed asset is resold to outsiders after S Co. has finished using it

Parent owns 80% equity of Subsidiary Company. During 2019, Subsidiary sold inventory costing $120,000 to Parent for $200,000. Half of the inventory was resold to external party for $130,000. The other half of the inventory remained in Parents ending inventory at the end of the 2019. How much unrealized profit should be eliminated from ending inventory in on Dec 31 2019?

Select one:

a. $40,000

b. $6,000

c. $80,000

d. $8,000

Pluto owns 80% of Silver. During 2012, Pluto sold goods with a 40% gross profit to Silver. Silver sold all of these goods to external party in 2012. For 2012, consolidated financial statements, how should the summation of Pluto and Silver income statement items be adjusted?

Select one:

a. No adjustment is necessary

b. Net income should be reduced by 80% of the intercompany sales

c. Sales and cost of sale should be reduced by 80% of the intercompany sales

d. Sales and cost of sale should be reduced by the intercompany sales