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Business, 16.06.2020 17:57 CoolRahim9090

Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2014, when the book values of Shenley's assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets. During 2014, Pouch sold merchandise that cost $70,000 to Shenley for $86,000. On December 31, 2014, three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory. Separate incomes (investment income not included) of the two companies are as follows:

Pouch Sherley
Sales Revenue $180,000 $160,000
Cost of Goods Sold 120,000 90,000
Operating Expenses 17,000 21,000
Separate incomes $43,000 $49,000

The consolidated income statement for Pouch Corporation and subsidiary for the year ended December 31, 2014 will show consolidated cost of sales of

a. $148,000.
b. $120,000.
c. $210,000.
d. $136,000.

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Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2014, when the book...
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