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

question 19

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 2014 and 2015.

During 2014, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2014, 30% of the inventory was unsold. In 2015, the remaining inventory was resold outside the consolidated entity.

-If the sale referred to above was a downstream sale,the total sales revenue reported in the consolidated income statement for 2014 would be

• A)$870,000.
• B)$880,000.
• C)$920,000.
• D)$970,000.

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Definitions:

Accounting Information

Data related to the financial transactions and status of an organization, used for decision-making, planning, and financial reporting.

Managers

Managers are individuals in an organization responsible for directing and overseeing the work of a group of people in achieving certain goals or completing projects.

General-Purpose Financial Statements

A type of financial accounting report that is distributed to external users. The term “general purpose” refers to the wide range of decision-making needs that the reports are designed to serve.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping businesses manage their cash flow.