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

question 30

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's 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: $\begin{array} { | l | r | r | } \hline & \text { Bates } & \text { Sam } \\\hline \text { Beginning inventory } & \$ 100,000 & \$ 50,000 \\\hline \text { Purchases } & 700,000 & 200,000 \\\hline \text { Ending inventory } & \underline { ( 110,000 } & \underline { 55,000 } \\\hline \text { Cost of goods sold } & \$ \underline { 690,000 } & \$ \underline { 195,000 } \\\hline\end{array}$ What is the balance of the inventory account on Bates's consolidated statement of financial position at December 31, 20X6?

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Definitions:

Information Architecture

The design and organization of information environments to make content findable and usable.

Vertical Hierarchy

An organizational structure where each entity in the organization, except one, is subordinate to a single other entity, forming a pyramid-like structure of power and authority.

Horizontal Division

The organization of work or responsibilities among peers or departments at the same level within a company.

Information-Delivery Machine

A system or device designed primarily for the purpose of providing or disseminating information.