Question 1
The Wilson Inc; a Turks and Caicos based company, acquired an 80% equity interest in a
Jamaican Company Inghram Corp on January 1, 2005. The cost of the investment was equal to
the book value of the interest acquired. Wilson Inc. accounted for the transaction as a purchase.
The following set of financial statements was provided by the Jamaican subsidiary.
Inghram Corp
Condensed Income Statement
For the year ended December 31, 2012
Sales
$12,000,000
Cost of sales
(2,000,000)
Gross profit
10,000,000
Depreciation
(800,000)
Other expenses (expense depreciation)
(9,000,000)
Net operating income
200,000
Gain on the sale of investments
600,000
Income taxes
(220,000)
Net income
$580,000
