X Inc Owns 80% of Y Inc

question 37

Multiple Choice

X Inc. owns 80% of Y Inc. During 2012, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end. Y Inc. sold Inventory to X Inc. for $5,000. 40% of this inventory remained in X's warehouse at year end. Both companies are subject to a tax rate of 40%. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its Investment in Y Inc. Assume that Y Inc. reported an after-tax net income of $20,000 in 2012, what would be Y's adjusted net income for the year?

• A) $202,400.
• B) $20,000.
• C) $19,840.
• D) $19,760.

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Definitions:

Orgasm

Climax of the sexual act, associated with a pleasurable sensation.

Erection

Condition of erectile tissue when filled with blood; tissue becomes hard and unyielding; especially refers to this state of the penis.

Castrated

The process or state of removing the testicles of a male animal or man.

Testosterone

A primary male sex hormone crucial for the development of male reproductive tissues and secondary sexual characteristics.