Suzlon, a subsidiary of Patni, provides services to Patni. During $2016,$ Suzlon charged $$2,000,000$ for services provided to Patni. Cost of the services provided was $$800,000.$ How should the consolidated income statement report these services?

Service revenue Service expense

$$2,000,000$ $$0$

Service revenue Service expense

$$2,000,000$ $$800,000$

Service revenue Service expense

$$0$ $$800,000$

Service revenue Service expense

$$0$ $$2,000,000$

Question $2$: Petronet sells merchandise to its $70-$percent$-$owned subsidiary Sonata at a markup of $25$ percent on cost$.$ During $2017,$ Petronet charges Sonata $$3,500,000$ for merchandise sales. Sonata's $2017$ beginning inventory contains $$520,000$ in merchandise purchased from Petronet. Sonata's $2017$ ending inventory contains $$460,000$ in merchandise purchased from Petronet. Petronet uses the complete equity method to record its investment in Sonata. How are Petronet's $2017$ equity in net income of Sonata and $2017$ consolidated income to the noncontrolling interest affected by intercompany merchandise transactions?

Equity in net income

$$12,000$ increase

Noncontrolling interest in net income

$$0$

Equity in net income

$ $8,400$ increase

Noncontrolling interest in net income

$$3,600$ increase

Equity in net income

$ $15,000$ increase

Noncontrolling interest in net income

$ $0$

Equity in net income

$ $10,500$ increase

Noncontrolling interest in net income

$ $4,500$ increase

Question $3$: Pentamedia owns $80$ percent of Sesa. At the start of $2016,$ Sesa sold buildings carried at $$9,000,000,$ net, to Pentamedia for $$11,250,000.$ The buildings had a remaining life of $10$ years and straight$-$line depreciation is used. Pentamedia uses the complete equity method to record its investment in Sesa. Pentamedia still owns the buildings. How are Pentamedia's $2017$ equity in net income of Sesa and $2017$ consolidated income to the noncontrolling interest affected by the intercompany sale of buildings?

Equity in net income Noncontrolling interest in net income

$$225,000$ increase $$0$

Equity in net income Noncontrolling interest in net income

$$720,000$ increase $$180,000$ increase

Equity in net income Noncontrolling interest in net income

$$900,000$ increase $$0$

Equity in net income Noncontrolling interest in net income

$$180,000$ increase $$45,000$ increase

Question $4$: A parent sells land costing $$70,000$ to a subsidiary in $2016$ for $$110,000.$ The subsidiary sells the land in $2018$ to a third party for $$160,000.$ On the consolidated income statement for $2018,$ the gain on sale of land should be reported at:

$$40,000$

$$90,000$

$$50,000$

$$0\mathrm{.}00$

Question $5$ A subsidiary sells land costing $$3,000,000$ to its parent in $2014$ for $$3,300,000.$ The parent owns $80$ percent of the subsidiary's stock. In $2017,$ the parent sells the land to an outside party for $$1,000,000.$ What eliminating entry $($I$)$ is required on the $2017$ consolidation working paper?

Debit the subsidiary's beginning retained earnings and credit the loss on sale of land for $$300,000.$

Debit investment in subsidiary and credit the loss on sale of land for $$300,000.$

Debit the subsidiary's beginning retained earnings and credit the loss on sale of land for $$2,000,000.$

Debit investment in subsidiary and credit the loss on sale of land for $$2,000,000.$

Question $6$ A subsidiary sells merchandise to its parent at a markup of $25\%$ on cost$.$ In $2017,$ the parent paid $$400,000$ for merchandise received from the subsidiary. By year$-$end $2017,$ the parent has sold $$250,000$ of the merchandise to outside customers for $$325,000,$ but still holds the other $$150,000$ in its ending inventory. Which statement is true concerning how this information should be reported on the $2017$ consolidated financial statements?

Consolidated sales should be $$325,000.$

The consolidated ending inventory balance should be $$150,000.$

Consolidated cost of goods sold should be $$250,000.$

Consolidated cost of goods sold should be $$450,000.$

Question $7$ A parent sells $$20,000,000$ retail value of merchandise to its subsidiary during $2016.$ The subsidiary's beginning inventory for $2016$ contains $$2,000,000$ in merchandise purchased from the parent, including a markup of $$400,000.$ The subsidiary's ending inventory for $2016$ contains $$3,000,000$ in merchandise purchased from the parent. The markup included in the ending inventory balance is $$550,000.$ On the $2016$ consolidation working paper, eliminations $($I$)$:

reduce ending inventory by $$400,000.$

reduce beginning retained earnings by $$550,000.$

reduce cost of goods sold by $$550,000.$

increase the parent's investment account by $$400,000.$