Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2014,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2014.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2014,are shown below.
Smackem's separate income statement must have reported net income of
A)$13,750.
B)$14,750.
C)$15,750.
D)$15,250.

Question

Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2014,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2014.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2014,are shown below. 
Smackem's separate income statement must have reported net income of
A)$13,750. 
B)$14,750. 
C)$15,750. 
D)$15,250.

Quizplus · Accepted Answer

The Answer of Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2014,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2014.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2014,are shown below. 
Smackem's separate income statement must have reported net income of
A)$13,750. 
B)$14,750. 
C)$15,750. 
D)$15,250.

Pinata Corporation Acquired an 80% Interest in Smackem Inc