Parent Corporation Owns 90 Percent of Subsidiary 1 Company's Stock

question 37

Multiple Choice

Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock.During 2008,Parent sold inventory purchased in 2007 for $48,000 to Subsidiary 1 for $60,000.Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2.Prior to December 31,2008,Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31,2008.
-Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008?

• A)$117,000
• B)$120,000
• C)$150,000
• D)$128,000

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Definitions:

Capital Spending

Expenditures by a company for the purchase, improvement, or maintenance of long-term assets to improve efficiency or capacity.

Contingency Planning

Taking into account the managerial options that are implicit in a project.