Q35. Company X owns 40% of company S and currently accounts for the investment using the equity method. Below are the 2002

     balance sheets and income statements for companies X and S, in thousands of dollars.

Company	S	X
Sales	200	1,000
Cost of goods sold (COGS)	140	700
Operating expenses	20	100
Income from investment in S	0	12
Earnings before taxes (EBT)	40	188
Taxes	10	47
Net income	30	141
< >>	< >>	< >>
Cash	10	50
Accounts receivable	20	100
Inventories	20	100
Other current assets	20	100
Property, plant, and equip.	130	610
Investment in S	0	40
Total assets	200	1,000
< >>	< >>	< >>
Liabilities	100	500
Stockholders’ equity	100	500

Company X purchases 25% of the output of company S, and $4,000 of the receivables of company S are from company X. If the investment is treated using the proportionate consolidation method, the COGS for company X will be:

A)   $742,000.

B)   $736,000.

C)   $756,000.

Q36. Company X owns 40% of company S and currently accounts for the investment using the equity method. Below

     are the 2002 balance sheets and income statements for companies X and S, in thousands of dollars.

Company	S	X
Sales	200	1,000
Cost of goods sold (COGS)	140	700
Operating expenses	20	100
Income from investment in S	0	12
Earnings before taxes	40	188
Taxes	10	47
Net income	30	141
Cash	10	50
Accounts receivable	20	100
Inventories	20	100
Other current assets	20	100
Property, plant, and equip.	130	610
Investment in S	0	40
Total assets	200	1,000
Liabilities	100	500
Stockholders’ equity	100	500

Company X purchases 25% of the output of company S, and $4,000 of the receivables of company S are from company X. If the investment is treated using the proportionate consolidation method, the accounts receivable for company X will be:

A)   $108,000.

B)   $106,400.

C)   $116,000.

答案和详解如下：

Q35. Correct answer is B)

COGS will be increased by the proportionate share of the COGS of company S, less the proportionate share of sales of S made to company X, which means COGS is equal to 700,000 + (0.4 × 140,000) − (0.4 × 0.25 × 200,000) = 736,000.

Q36. Correct answer is B)

The receivables will be increased by the proportionate share of the receivables of company S that are not from company X, which means receivables will be 100,000 + 0.4 × (20,000 − 4,000) = 106,400.

Thanks

b