Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells

question 90

Multiple Choice

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.
Compute the equity in earnings of Gargiulo reported on Posito's books for 2012.

• A) $63,000.
• B) $62,730.
• C) $63,270.
• D) $70,000.
• E) $62,700.

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Definitions:

IRR

Internal Rate of Return represents a financial measure for assessing the potential profitability of investments.

Marginal Cost

The cost added by producing one additional unit of a product or service.

Average Total Cost

Calculated as the total cost of production (fixed plus variable costs) divided by the total output, indicating the average cost per unit produced.