Reference no: EM133133174
Question - Portland Inc. (Portland) owns 80% of Seattle Inc. (Seattle) and uses the cost method to account for its investment. The 2023 income statements of both companies are shown below.
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Portland
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Seattle
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Gross profit
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$100,000
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$50,000
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|
Miscellaneous revenues (losses)
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(30,000)
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(20,000)
|
|
Depreciation expense
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(20,000)
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(15,000)
|
|
Income tax expense
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(20,000
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(6,000)
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|
Net Income
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$30,000
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$9,000
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On January 1, 2023, Seattle acquired equipment for $7,000 and sold it the same day to Portland for $12,000. The equipment had a remaining useful life of 10 years on that date. Both companies are subject to an effective tax rate of 40%.
Which of the following is the correct amount of gross profit appearing on Portland's 2023 consolidated income statement?
Which of the following is the correct amount of depreciation expense appearing on Portland's 2023 consolidated income statement?
What is the correct amount of income tax expense appearing on Portland's 2023 consolidated income statement?
Which of the following is the correct amount of consolidated net income attributable to the non-controlling interest in Portland's 2023 consolidated income statement?
Which of the following is the correct amount of deferred taxes appearing on Portland's 2023 consolidated balance sheet?
Which of the following statements correctly describes the effect on the consolidated balance sheet when the gain on the intercompany sale of the equipment is eliminated?