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

question 108

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 noncontrolling interest in Gargiulo's net income for 2011.

• A) $8,500.
• B) $8,570.
• C) $8,430.
• D) $8,400.
• E) $7,580.

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Definitions:

Geographic Divisionalized Structure

An organizational structure where operations are divided based on geographic regions, with each region operating semi-autonomously to serve its local market effectively.

Divisionalized Structures

An organizational form in which the company is divided into semi-autonomous units or divisions, each responsible for its own operations and profitability.

Network Structure

An organizational design where entities are connected less hierarchically and more through a flexible arrangement of nodes, facilitating information flow and collaboration.

Global Competition

The scenario where businesses compete across national borders in various markets, driven by increasingly interconnected world economies.