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

question 1

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, 2010. $$\begin{array} { l c r r } & \mathbf { 2 0 1 0 } & \mathbf { 2 0 1 1 } & \mathbf { 2 0 1 2 } \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$$ Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. $\begin{array}{lrrr}&2010&2011&2012\\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$
-Compute the equity in earnings of Gargiulo reported on Posito's books for 2011.

• A) $76,500.
• B) $77,130.
• C) $75,870.
• D) $75,600.
• E) $75,800.

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Definitions:

Marketing Concept

A business philosophy suggesting that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating customer value.

Customer Needs

Refers to the desires and requirements of clients that a company aims to fulfill with its products or services.

Production Orientation

A business approach that focuses on the efficiency of production and distribution processes rather than understanding and meeting the needs of the consumer.

Unit Costs

The total expense incurred by a company to produce, store, and sell one unit of a particular product or service.