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

question 30

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 sales must be eliminated from the consolidated income statement for 2008?

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

---

Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often used to assess interest rate risk.

Coupon Rate

The annual interest rate paid on a bond's face value to its holders, expressed as a percentage of the face value.

Duration

Measures the sensitivity of a bond's price to changes in interest rates, calculated as a weighted average of the times until the bond's cash flows are received.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, including all interest payments and the repayment of principal.