Pied Imperial Corporation acquired a 90% interest in Somest Corporation in 2009 when Somest's book values were equivalent to fair values.Somest sold equipment with a book value of $80,000 to Pied for $130,000 on January 1,2011.Pied is fully depreciating the equipment over a 4-year period by using the straight-line method.Somest reported net income for 2011 was $320,000.Pied's 2011 income from Somest was

Question

Quizplus · Accepted Answer

C)
Pied's share of Somest's income =
($320,000 × 90%)$288,000
Less: Profit on intercompany sale
($130,000 - $80,000)× 90% = (45,000)
Add: Piecemeal recognition of deferred
profit ($50,000/4)× 90% 11,250
Income from Somest $254,250

Pied Imperial Corporation Acquired a 90% Interest in Somest Corporation