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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Definitions:

FOB Destination

A term used in shipping indicating that the seller is responsible for the freight costs and owns the goods in transit until they are delivered to the buyer's location.

Merchandise Inventory

The goods a retail store has purchased and intends to sell to customers, representing one of the retailer's primary assets.

General and Administrative Expenses

Overhead expenses not directly tied to a specific function like production or sales, including executive salaries, legal fees, and other administrative costs.

FOB Shipping Point

A term used in shipping where the buyer takes responsibility for the goods once they are shipped, and bears transportation costs.