Part 1: Multiple Choice Questions INSTRUCTION: Write the letter of the correct answer on the space provided. 1) Parrot Company completely owns Heathlands Inc. On January 2, 2021 Parrot sold Heathlands machinery at its book value of P 30,000. Parrot had the machinery two years before selling it and used a five-year straight-line depreciation method, with zero salvage value. Heathlands will use a three-year straight-line method. In the 2021 consolidated income statement, the depreciation expense A. Required no adjustment B. Decreased by P 4,000 C. Increased by P 4,000 D. Increased by P 30,000 2) The unrealized profit in intercompany sales above cost is eliminated in the consolidated balance sheet from the A. seller's beginning inventory B. seller's ending inventory C. buyer's beginning inventory D. buyer's ending inventory 3) A parent and its 80% owned subsidiary regularly sell merchandise to each other above cost. What percent of intercompany sales and purchases should be eliminated in the consolidated working paper? A. 80% of both downstream and upstream sales and purchases B. 80% of downstream and 100% upstream sales and purchases C. 100% of both downstream and upstream sales and purchases D. 100% of downstream and 90% upstream sales and purchases 4) In reference to the downstream or upstream sale of depreciable assets, which of the following statements is correct? A. Upstream sales from the subsidiary to the parent company always result in unrealized gains or losses. B. The initial effect of unrealized gains and losses from downstream sales of depreciable assets is different from the sale of nondepreciable assets. C. Gains, but not losses, appear in the parent-company accounts in the year of sale and must be eliminated by the parent company in determining its investment income under the equity method of accounting. D. Gains and losses appear in the parent-company accounts in the year of sale and must be eliminated by the parent company in determining its investment income under the equity method of accounting.