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

question 4

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.

-For 2014,consolidated net income will be what amount if the intercompany sale was downstream?

• A)$180,000
• B)$253,000
• C)$256,000
• D)$259,000

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Definitions:

Business Transactions

Activities that involve the exchange of goods, services, or money between businesses or individuals.