West Corp Owned 70% of the Voting Common Stock of East

question 10

Multiple Choice

West Corp. owned 70% of the voting common stock of East Co. East owned 60% of Compass Co. West and East both used the initial value method to account for their investments. The following information was available from the financial statements and records of the three companies: Operating income included unrealized intra-entity gains (which are related to inventory transfers) but did not include dividend income from investment in subsidiary.
The accrual-based income of East Co. is calculated to be

• A) $385,700.
• B) $581,000.
• C) $557,000.
• D) $551,000.
• E) $707,000.

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