Bates LtdOwns 60% of the Outstanding Common Shares of Sam Ltd

question 23

Multiple Choice

Bates Ltd.owns 60% of the outstanding common shares of Sam Ltd.During 20X6,sales from Sam to Bates were $200,000.Merchandise was priced to provide Sam with a gross margin of 20%.Bates' inventories contained $40,000 at December 31,20X5 and $15,000 at December 31,20X6 of merchandise purchased from Sam.Cost of goods sold for Bates and Sam for 20X6 on their separate-entity income statements were as follows:

What is cost of goods sold on the consolidated income statement for 20X6?

• A)$687,000
• B)$680,000
• C)$685,600
• D)$660,000

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Definitions:

Pollution Standard

Pollution standards are regulatory norms established by governments or international bodies to limit the concentration of harmful substances released into the environment.

Social Rate

Often refers to the rate of return on a public investment or project that includes both the private and external benefits to society.

NPV Analysis

A method of calculating the present value of an investment's expected cash flows minus the initial investment cost to assess profitability.

Externalities

The unintended positive or negative consequences of an economic activity on unrelated third parties.