Charleston Inc

question 37

Multiple Choice

Charleston Inc. acquired 75% of Savannah Manufacturing on January 4, 2020. During 2020, Charleston sold Savannah $460,000 of goods, which had cost $380,000. Savannah still owned 20% of the goods at the end of the year. In 2021, Charleston sold goods with a cost of $520,000 to Savannah for $700,000, and Savannah still owned 15% of the goods at year-end. What amount of intra-entity gross profit should be recognized through the consolidation process in 2021?

• A) $27,000.
• B) $20,250.
• C) $16,000.
• D) $12,000.
• E) $0.

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Definitions:

Multidomestic Strategy

A strategy used by companies that involves customizing products and marketing strategies to specific national conditions to gain local market share.

Market Diversity

The variety and heterogeneity of products, services, consumers, and entities within a market, enhancing competition and innovation.

Polycentric View

Refers to a perspective in international business where a company adapts its strategies and operations to the local conditions of the countries it operates in, often giving significant autonomy to each local branch.

Divestiture

The process of selling off subsidiary business interests or investments by a company to refocus its operations or to raise capital.