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In 2012, Ouyang Inc. held a 15% equity ownership interest in Huang Inc., which was classified as available-for-sale. During the year, the value of this investment decreased by $2 million. In 2013, Ouyang Inc. increased its ownership interest to 60%. Ouyang Inc. reported the following information.
EXHIBIT A: Ouyang Inc. (in millions)
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,639 1,427 Operating income 283 217 Net income 87 73 2013 2012 Total assets 3,827 2,839 Shareholders’ equity 729 689
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,639 1,427 Operating income 283 217 Net income 87 73 2013 2012 Total assets 3,827 2,839 Shareholders’ equity 729 689
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012
Financial Information
Financial Information
Year ending Dec 31, 2013
Year ending Dec 31, 2013
Year ending Dec 31, 2012
Year ending Dec 31, 2012
Sales 1,639 1,427
Sales
Sales
1,639
1,639
1,427
1,427
Operating income 283 217
Operating income
Operating income
283
283
217
217
Net income 87 73
Net income
Net income
87
87
73
73
2013 2012

2013
2013
2012
2012
Total assets 3,827 2,839
Total assets
Total assets
3,827
3,827
2,839
2,839
Shareholders’ equity 729 689
Shareholders’ equity
Shareholders’ equity
729
729
689
689

EXHIBIT B: Huang Inc. (in millions)
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,182 928 Operating income 72 68 Net income 53 47 Dividends paid 30 30 2013 2012 Total assets 989 827 Shareholders’ equity 389 374
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,182 928 Operating income 72 68 Net income 53 47 Dividends paid 30 30 2013 2012 Total assets 989 827 Shareholders’ equity 389 374
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012
Financial Information
Financial Information
Year ending Dec 31, 2013
Year ending Dec 31, 2013
Year ending Dec 31, 2012
Year ending Dec 31, 2012
Sales 1,182 928
Sales
Sales
1,182
1,182
928
928
Operating income 72 68
Operating income
Operating income
72
72
68
68
Net income 53 47
Net income
Net income
53
53
47
47
Dividends paid 30 30
Dividends paid
Dividends paid
30
30
30
30
2013 2012

2013
2013
2012
2012
Total assets 989 827
Total assets
Total assets
989
989
827
827
Shareholders’ equity 389 374
Shareholders’ equity
Shareholders’ equity
389
389
374
374
1.
In 2012, the income of Ouyang Inc. includes a contribution from its investment in Huang Inc. that is closest to:
A) $10.5 million B) $9.5 million C) $ 6.5 million D) $4.5 million E) $2.5 million

2.
At Dec 31, 2013, Ouyang’s total shareholders’ equity on its balance sheet would most likely be:
A) highest if Ouyang Inc. is deemed to have control of Huang Inc.; B) highest if Ouyang Inc. has not increased its stake in Huang Inc.; C) independent of the accounting method used for the investment in Huang Inc.; D) lowest if Ouyang Inc. is deemed to have control of Huang Inc.; E) highest if Ouyang Inc. is deemed to have no stake in Huang Inc.;

Assuming that Ouyang Inc. in 2012 held a 10 percent stake in Huang Inc. that was classified as held for trading securities. During the year, the value of this stake increased by $7 million. In 2013, Ouyang Inc. increased the ownership to 40%. Use the following financial information to answer questions 3-5.
EXHIBIT A: Ouyang Inc. (in millions)
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,639 1,427 Operating income 283 217 Net income 87 73 2013 2012 Total assets 3,827 2,839 Shareholders’ equity 729 689
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,639 1,427 Operating income 283 217 Net income 87 73 2013 2012 Total assets 3,827 2,839 Shareholders’ equity 729 689
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012
Financial Information
Financial Information
Year ending Dec 31, 2013
Year ending Dec 31, 2013
Year ending Dec 31, 2012
Year ending Dec 31, 2012
Sales 1,639 1,427
Sales
Sales
1,639
1,639
1,427
1,427
Operating income 283 217
Operating income
Operating income
283
283
217
217
Net income 87 73
Net income
Net income
87
87
73
73
2013 2012

2013
2013
2012
2012
Total assets 3,827 2,839
Total assets
Total assets
3,827
3,827
2,839
2,839
Shareholders’ equity 729 689
Shareholders’ equity
Shareholders’ equity
729
729
689
689

EXHIBIT B: Huang Inc. (in millions)
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,182 928 Operating income 72 68 Net income 53 47 Dividends paid 30 30 2013 2012 Total assets 989 827 Shareholders’ equity 389 374
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012 Sales 1,182 928 Operating income 72 68 Net income 53 47 Dividends paid 30 30 2013 2012 Total assets 989 827 Shareholders’ equity 389 374
Financial Information Year ending Dec 31, 2013 Year ending Dec 31, 2012
Financial Information
Financial Information
Year ending Dec 31, 2013
Year ending Dec 31, 2013
Year ending Dec 31, 2012
Year ending Dec 31, 2012
Sales 1,182 928
Sales
Sales
1,182
1,182
928
928
Operating income 72 68
Operating income
Operating income
72
72
68
68
Net income 53 47
Net income
Net income
53
53
47
47
Dividends paid 30 30
Dividends paid
Dividends paid
30
30
30
30
2013 2012

2013
2013
2012
2012
Total assets 989 827
Total assets
Total assets
989
989
827
827
Shareholders’ equity 389 374
Shareholders’ equity
Shareholders’ equity
389
389
374
374

3.
In 2012, the income of Ouyang Inc. includes a contribution from its investment in Huang Inc. that is closest to:
A) $13 million B) $10 million C) $ 5 million D) $1 million E) ($1 million).

4.
If Ouyang Inc. is deemed to have significant influence over Huang Inc., its 2013 net income (in $ millions) would be closest to:
A) 108.2 B) 113.5 C) 124.5 D) 132.5 E) 138.7

5.
If Ouyang Inc. is deemed to have control over Huang Inc., its 2013 consolidated sales (in millions) will be closest to:
A) 1,639 B) 1,875.4 C) 2,821 D) 3,827 E) 4,293

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