Use the Following Information to Answer the Question(s) Below $P =$

question 24

Multiple Choice

Use the following information to answer the question(s) below.

Paiva Corporation owns 80% of Ackroyd Corporation's outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the outstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2014 (excluding investment income) are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach.

Symbols used:
$P =$ Income of Paiva on a consolidated basis
A = Income of Ackroyd on a consolidated basis
B = Income of Eailey on a consolidated basis
-The equation,in a set of simultaneous equations,that computes Paiva Corporation income on a consolidated basis is

• A)P = $50,000 + 0.8B.
• B)P = $30,000 + 0.2A.
• C)P = $100,000 + 0.2A.
• D)P = $100,000 + 0.8A.

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