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 should have been reported for consolidated net income?
A) $1,285,000.
B) $1,331,700.
C) $1,349,000.
D) $1,315,000.
E) $1,314,900.

Question

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 should have been reported for consolidated net income?
A) $1,285,000. 
B) $1,331,700. 
C) $1,349,000. 
D) $1,315,000. 
E) $1,314,900.

Quizplus · Accepted Answer

The Answer is C

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