Use the Following Information to Answer the Question(s)below

question 27

Multiple Choice

Use the following information to answer the question(s) below.
Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value.At the time of purchase,the book value and fair value of Spillway's net assets were equal.The two companies report the following information for 2011 and 2012.
During 2011,one company sold inventory to the other company for $50,000 which cost the transferor $40,000.As of the end of 2011,30% of the inventory was unsold.In 2012,the remaining inventory was resold outside the consolidated entity.

-If the sale referred to above was a downstream sale,by what amount must Inventory on the consolidated balance sheet be reduced to reflect the correct balance as of the end of 2011?

• A)$3,000
• B)$10,000
• C)$14,000
• D)$20,000

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Definitions:

Probable Cause

A reasonable basis for believing that a crime may have been committed, which is necessary for certain legal actions like issuing a search warrant.

Unreasonable Searches

A term referring to searches conducted by law enforcement without a valid warrant or without an applicable exception to the warrant requirement, violating the Fourth Amendment.

Establishment Clause

One of two provisions in the First Amendment of the U.S. Constitution that protect citizens’ freedom of religion. It prohibits (i) the establishment of a national religion by Congress and (ii) the preference of one religion over another or of religion over nonreligious philosophies in general.

First Amendment

The part of the United States Constitution that protects freedoms of speech, religion, press, assembly, and petition.