Middle Company holds 60 percent of Bottom Corporation’s voting shares. Bottom has developed a new type of production equipment that appears to be quite marketable. It spent P40,000 in developing the equipment; however, Middle agreed to purchase the production rights for the machine for P100,000. If the intercompany sale occurred on January 1, 20x2, and the production rights are expected to have value for five years, at what amount should the RIGHTS be reported in the consolidated balance sheet for December 31, 20x2? A. 0 C. 80,000 B. 32,000 D. 100,000
Middle Company holds 60 percent of Bottom Corporation’s voting shares. Bottom has developed a new type of production equipment that appears to be quite marketable. It spent P40,000 in developing the equipment; however, Middle agreed to purchase the production rights for the machine for P100,000. If the intercompany sale occurred on January 1, 20x2, and the production rights are expected to have value for five years, at what amount should the RIGHTS be reported in the consolidated balance sheet for December 31, 20x2? A. 0 C. 80,000 B. 32,000 D. 100,000
Chapter2: Income Tax Concepts
Section: Chapter Questions
Problem 24P
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Middle Company holds 60 percent of Bottom Corporation’s voting shares. Bottom has developed a new type of production equipment that appears to be quite marketable. It spent P40,000 in developing the equipment; however, Middle agreed to purchase the production rights for the machine for P100,000. If the intercompany sale occurred on January 1, 20x2, and the production rights are expected to have value for five years, at what amount should the RIGHTS be reported in the consolidated balance sheet for December 31, 20x2?
A. 0 C. 80,000
B. 32,000 D. 100,000
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