_____ In 2006, Pulco acquired inventory from its 75%-owned subsidiary, Sulco, for $250,000. Sulco's cost was $200,000. At 12/31/06, Pulco reported $40,000 of intercompany-acquired inventory in its balance sheet. The amount by which the 2006 consolidated net income that accrues to the controlling interest will be lower as a result of this being an intercompany transaction is

Question

Quizplus · Accepted Answer

The correct answer is $6,000, which is calculated by taking the unrealized profit ($50,000 = $250,000 - $200,000) multiplied by the portion of inventory still on hand at the end of the year ($40,000 / $250,000 = 16%), and then considering the parent's share (75%). So, $50,000 * 16% * 75% = $6,000. This amount needs to be eliminated from consolidated net income attributable to the controlling interest because it represents unrealized profit from an intercompany transaction.

_____ in 2006, Pulco Acquired Inventory from Its 75%-Owned Subsidiary