P Company Owns an 80% Interest in S Company

question 7

Multiple Choice

P Company owns an 80% interest in S Company. During 2017, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2017, 50% of this merchandise is included in P's inventory. Income statements for P and S are summarized below: Controlling interest in consolidated net income for 2017 is:

• A) $300,000.
• B) $380,000.
• C) $396,000.
• D) $420,000.

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Definitions:

Revenues

The total income generated from normal business operations and other activities.

Direct Labor Hours

The total hours worked directly on producing a product or delivering a service, often used as a basis for allocating manufacturing overhead to products or services.

Engineering Changes

Modifications to the design, materials, or specifications of a product or system, often made to improve performance, reduce costs, or correct defects.

Indirect Cost

Expenses not directly tied to the production of goods or services, such as administrative salaries, rent, and utilities.