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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:

-What is Pouch's income from Shenley for 2014?
A)$27,200
B)$29,600
C)$39,200
D)$49,000

Question

Use the following information to answer the question(s) below.

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:

-What is Pouch's income from Shenley for 2014?
A)$27,200 
B)$29,600 
C)$39,200 
D)$49,000

Quizplus · Accepted Answer

The correct income for Pouch from Shenley for 2014 is $27,200.

Use the Following Information to Answer the Question(s) Below