Levi Ltd Owns 60% of the Outstanding Common Shares of Modry

question 51

Multiple Choice

Levi Ltd. owns 60% of the outstanding common shares of Modry Ltd. During 2013, sales from Modry to Levi were $200,000. Merchandise was priced to provide Modry with a gross margin of 20%. Levi's inventories contained $40,000 at December 31, 2012 and $15,000 at December 31, 2013 of merchandise purchased from Modry. Cost of goods sold for Levi and Modry for 2013 on their separate-entity income statements were as follows: $\begin{array}{|l|r|r|} \hline& \text { Levi } & \text { Modry } \\\hline \text { Beginning inventory } & \$ 100,000 & \$ 50,000 \\\hline \text { Purchases } & 700,000 & 200,000 \\\hline \text { Ending inventory } & (110,000) & (55,000) \\\hline \text { Cost of goods sold } & \$ 690,000 & \$ 195,000 \\\hline\end{array}$ What is the balance of the inventory account on Levi's consolidated statement of financial position at December 31, 2013?

• A)$162,000
• B)$140,000
• C)$160,000
• D)$165,000

---

Definitions:

International Boundary

The officially recognized line that separates one country from another, defining the geographical limits of sovereign jurisdictions.

Translators

Individuals or software that convert text or speech from one language to another, enabling communication across different languages.

Common Property Resources

Resources like land, air, and water that are not owned privately but are available for use by an entire community or society.

Single Ownership

A business model where a single individual owns all of the firm's stock and is solely responsible for its decisions.