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

question 27

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 2011 and 2012.
During 2011,one company sold inventory to the other company for $50,000 which cost the transferor $40,000.As of the end of 2011,30% of the inventory was unsold.In 2012,the remaining inventory was resold outside the consolidated entity.

-If the sale referred to above was a downstream sale,by what amount must Inventory on the consolidated balance sheet be reduced to reflect the correct balance as of the end of 2011?

• A)$3,000
• B)$10,000
• C)$14,000
• D)$20,000

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Definitions:

Lethargic

A state of sluggishness, fatigue, or lack of energy, often a symptom of various medical conditions or psychological issues.

Major Depressive Disorder

A mental disorder characterized by a pervasive and persistent low mood accompanied by low self-esteem, and by a lack of interest or pleasure in normally enjoyable activities.

DSM-5

Stands for Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, which is a comprehensive classification and diagnostic guide used by mental health professionals.

Symptoms

Observable signs or indicators of a disease or condition experienced by an individual.