Peregrine Corporation acquired an 80% interest in Serine Corporation in 2009 at a time when Serine's book values and fair values were equal to one another.On January 1,2012,Serine sold a truck with a $55,000 book value to Peregrine for $100,000.Peregrine is depreciating the truck over 10 years using the straight-line method.The truck has no salvage value.Separate incomes for Peregrine and Serine for 2012 were as follows: Peregrine's investment income from Serine for 2012 was

Question

Peregrine Corporation acquired an 80% interest in Serine Corporation in 2009 at a time when Serine's book values and fair values were equal to one another.On January 1,2012,Serine sold a truck with a $55,000 book value to Peregrine for $100,000.Peregrine is depreciating the truck over 10 years using the straight-line method.The truck has no salvage value.Separate incomes for Peregrine and Serine for 2012 were as follows:  Peregrine's investment income from Serine for 2012 was

Quizplus · Accepted Answer

C)Serine reported income $225,000
Less: Intercompany gain on truck (45,000)
Plus: Recognition of gain ($45,000 / 10)4,500
Serine's adjusted income 184,500
Majority percentage 80%
Income from Serine $147,600

Peregrine Corporation Acquired an 80% Interest in Serine Corporation in 2009