Sub Company Sells All Its Output at 20 Percent Above

question 18

Multiple Choice

Sub Company sells all its output at 20 percent above cost to Par Corporation.Par purchases its entire inventory from Sub.The incomes reported by the companies over the past three years are as follows:
Sub Company sold inventory for $300,000,$262,500 and $337,500 in the years 20X6,20X7,and 20X8 respectively.Par Company reported ending inventory of $105,000,$157,500 and $180,000 for 20X6,20X7,and 20X8 respectively.Par acquired 70 percent of the ownership of Sub on January 1,20X6,at underlying book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

-A subsidiary made sales of inventory to its parent at a profit this year.The parent,in turn,sold all but 20 percent of the inventory to unaffiliated companies,recognizing a profit.The amount that should be reported as cost of goods sold in the consolidated income statement prepared for the year should be:

• A)the amount reported as intercompany sales by the subsidiary.
• B)the amount reported as intercompany sales by the subsidiary minus unrealized profit in the ending inventory of the parent.
• C)the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent.
• D)the amount reported as cost of goods sold by the parent.

Differentiate between various dietary preferences and their nutritional implications.

Recognize the importance of energy balance in weight management.

Categorize various vegetable subgroups and offer examples for each.

Evaluate the effectiveness and risks of weight-loss supplements compared to lifestyle modifications.

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Definitions:

Price-Taking Firm

A price-taking firm is a company that must accept the market price for its product, having no influence on the price due to its small size relative to the industry.

Market Power

The ability of a firm to control the price and output of products in its market, often due to limited competition.

Government-Set Barriers

Regulations and policies established by governments to control the entry of firms into certain markets or to protect domestic industries from foreign competition.

Economies of Scale

The cost advantage experienced by a firm when it increases its level of output. The average costs per unit of output decrease with the scaling up of production.