Question

The following information is used for the following two questions. Ping and Slazenger Company (its 90% owned affiliate) reported the following income information for year X1:

	Ping	Slazenger
Revenue	300,000	100,000
Cost of Sales	120,000	40,000
Selling, General, and Adm Expenses	40,000	20,000
Depreciation	20,000	10,000
Investment Income	?
Total Net Income	?	30,000

During Year X1, Slazenger made sales of $20,000 to Ping. Slazenger’s Cost of Sales was $10,000. As of 12/31/X1, Ping had still owned 60% of the units acquired from Slazenger. Based on this information, how much Consolidated Income should Ping report?

Please select the correct answer below only one:

a. $140,000

b. $144,000

c. $146,000

d. $150,000

e. None of the Above

Answer 1

Answer (B) $ 144,000

Answer:
Particulars	Ping	Slazenger
Revenue	$3,00,000.00	$1,00,000.00
Cost of Sales	$1,20,000.00	$40,000.00
Selling, General, and Adm Expenses	$40,000.00	$20,000.00
Depreciation	$20,000.00	$10,000.00
Investment Income (100% of Net Income of Slazenger)	$30,000.00	-
less: Stock Reserve (Working)	$6,000.00
Total Net Income	$1,44,000.00	$30,000.00
Working:
Stock reserve
Particulars	Amount
Mark up
Sales made to Ping (A)	$20,000.00
Cost of sales (B)	$10,000.00
Mark up C= A-B	$10,000.00
Mark up % = C/A	50%
Stock lying at the end 60% ($ 20000 X 60%)	$12,000.00
Mark up on closing stock	$6,000.00
Stock reserve to be made	$6,000.00