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

question 35

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.
What amount should have been reported for consolidated net income?

• A) $1,285,000.
• B) $1,331,700.
• C) $1,349,000.
• D) $1,315,000.
• E) $1,314,900.

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Definitions:

Social Clock

The culturally determined psychological timepiece providing a sense of whether we have reached the major benchmarks of life at the appropriate time in comparison to our peers.

Maturation

The predetermined unfolding of genetic information.

Intimacy-versus-Isolation Stage

A concept in Erik Erikson's theory of psychosocial development where individuals face the challenge of forming intimate relationships with others versus feeling isolated.

Postformal Thought

Thinking that acknowledges that adult predicaments must sometimes be solved in relativistic terms.