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

question 103

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 of dividends did West Corp. receive from Compass Co.?

• A) $-0-
• B) $25,200.
• C) $36,000.
• D) $42,000.
• E) $90,000.

---

Definitions:

Contracting

The process of entering into formal agreements with individuals or companies to provide services or goods.

Outplacement

A service provided by organizations to assist former employees transition to new jobs, offering support such as resume writing and interview coaching.

Employee Leasing

A business arrangement where a company contracts with a third-party firm to handle the administration, recruitment, and training of staff, effectively leasing the employees from the third party.

Trade Agreement

A formal arrangement between two or more countries to regulate tariffs, trade barriers, and other trade-related issues.