P Corporation Acquired a 60% Interest in S Corporation on January

question 19

Multiple Choice

P Corporation acquired a 60% interest in S Corporation on January 1, 2014, at book value equal to fair value.During 2014, P sold merchandise that cost $225,000 to S for $315,000.One-third of this merchandise remained in S's inventory at December 31, 2014.S reported net income of $200,000 for 2014.P's income from S for 2014 is:

• A)$60,000.
• B)$90,000.
• C)$120,000.
• D)$102,000.

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Definitions:

Financial Reporting

The method of creating reports that reveal a company's financial condition to its management, investors, and governmental bodies.

Accounts Receivable Turnover

Accounts receivable turnover is a financial ratio that measures how efficiently a company collects its receivables or the credit it has extended to its customers.

Net Sales

Total revenues from sales transactions minus returns, allowances, and discounts.

Allowance Method

A method of accounting for bad debts that involves estimating and recording uncollectible accounts receivable as an expense.