P Company sold merchandise costing $240,000 to S Company (90% owned) for $300,00

Question

P Company sold merchandise costing $240,000 to S Company (90% owned) for $300,000. At the end of the current year, one-third of the merchandise remains in S Company's inventory. Applying the lower-of-cost-or-market rule, S Company wrote this inventory down to $92,000. What amount of intercompany profit should be eliminated on the consolidated statements workpaper?

$20,000.

$12,000.

$10,800.

$18,000.

When the value implied by the purchase price of a subsidiary is in excess of the fair value of identifiable net assets, the workpaper entry to allocate the difference between implied and book value includes a:

credit to Excess of Implied over Fair Value.

debit to Difference Between Implied and Book Value.

credit to Difference Between Implied and Book Value.

debit to Difference Between Implied and Book Value and credit to Excess of Implied over Fair Value.

On January 1, 2016, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2016, consolidated balance sheet, goodwill would be reported at:

$0.

$80,000.

$177,143.

$152,000.

$20,000.

$12,000.

$10,800.

$18,000.

Explanation / Answer

2)

option B

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