Peregrine Corporation acquired an 80% interest in Serine Corporation in 2011 at a time when Serine’s book values and fair values were equal to one another.

On January 1, 2014, 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 2014 were as follows:

Peregrine Serine

Sales $1,800,000 $1,050,000

Gain on sale of truck 45,000

Cost of Goods Sold (750,000) (285,000)

Depreciation expense (450,000) (135,000)

Other expenses (180,000) (450,000)

Separate incomes $ 420,000 $ 225,000

Peregrine’s investment income from Serine for 2014 was

A) $108,000.

B) $144,000.

C) $147,600.

D) $180,000.

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