P Company Purchased 80% of the Outstanding Common Stock of S

question 17

Multiple Choice

P Company purchased 80% of the outstanding common stock of S Company on May 1, 2014, for a cash payment of $1,272,000.S Company's December 31, 2013 balance sheet reported common stock of $800,000 and retained earnings of $540,000.During the calendar year 2014, S Company earned $840,000 evenly throughout the year and declared a dividend of $300,000 on November 1.What is the amount needed to establish reciprocity under the cost method in the preparation of a consolidated workpaper on December 31, 2015?

• A)$208,000
• B)$260,000
• C)$248,000
• D)$432,000

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Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including expenses related to operating the manufacturing facilities.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product efficiently.

Factory Rent

The cost incurred for the space leased or rented to operate a manufacturing or production facility.

Direct Costs

Costs that can be directly attributed to the production of specific goods or services, such as labor or materials.