On January 1,2014,Plastam Industries Acquired an 80% Interest in Sparta

question 38

Multiple Choice

On January 1,2014,Plastam Industries acquired an 80% interest in Sparta Company to assure a steady supply of Sparta's inventory that Plastam uses in its own manufacturing businesses.Sparta sold 100% of its output to Plastam during 2014 and 2015 at a markup of 125% of Sparta's cost.Plastam had $12,000 of these items remaining in its inventory at December 31,2015.If Plastam neglected to eliminate unrealized profits from all intercompany sales from Sparta,the inventory on the consolidated balance sheet at December 31,2015 was

• A)overstated by $1,920.
• B)understated by $1,920.
• C)overstated by $2,400.
• D)understated by $2,400.

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Definitions:

β Value

In statistics, represents the type II error rate, or the probability of failing to reject a false null hypothesis; also used to denote regression coefficients in multiple regression models.

Increasing

Becoming greater or larger in quantity, size, intensity, or degree.

Standard Deviation

A figure that gauges the scatter of data points around the mean value, demonstrating the extent of dispersion.

Test Statistic

A standardized value used in statistical hypothesis testing to determine whether to reject the null hypothesis.