P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and Iliabilities were equal to fair values. During 2014, P sold merchandise to S cost 40,000 for $32,000. At December 31, 2014, 75% of this merchandise sold to third party. Separate incomes for P&S are summarized as follows: Sales $900,000 $200,000 Cost of sales 400,000 100,000 Gross profit 500,000 100,000 Operating expenses 200,000 80,000 Separate income amount of income from s reported in P income statement ? $300,000 $ 20,000 What is Select one: a. 19,800 b. 18,000 c. 20,000 d. 16,200

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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### Consolidated Financial Statements: Income Analysis

#### Overview:
P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and liabilities were equal to fair values. During 2014, P sold merchandise to S that cost $40,000 for $32,000. As of December 31, 2014, 75% of this merchandise sold to a third party. Below is the summary of separate incomes for P and S:

#### Income Summary:

**P CO:**
- **Sales:** $900,000
- **Cost of sales:** $400,000
- **Gross profit:** $500,000
- **Operating expenses:** $200,000
- **Separate income:** $300,000

**S CO:**
- **Sales:** $200,000
- **Cost of sales:** $100,000
- **Gross profit:** $100,000
- **Operating expenses:** $80,000
- **Separate income:** $20,000

#### Question:
What is the amount of income from S reported in P’s income statement?

**Options:**
- a. $19,800
- b. $18,000
- c. $20,000
- d. $16,200

Select the correct option from the choices given.

---
This information is designed to provide insights into financial accounting and consolidation practices for educational purposes.
Transcribed Image Text:### Consolidated Financial Statements: Income Analysis #### Overview: P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and liabilities were equal to fair values. During 2014, P sold merchandise to S that cost $40,000 for $32,000. As of December 31, 2014, 75% of this merchandise sold to a third party. Below is the summary of separate incomes for P and S: #### Income Summary: **P CO:** - **Sales:** $900,000 - **Cost of sales:** $400,000 - **Gross profit:** $500,000 - **Operating expenses:** $200,000 - **Separate income:** $300,000 **S CO:** - **Sales:** $200,000 - **Cost of sales:** $100,000 - **Gross profit:** $100,000 - **Operating expenses:** $80,000 - **Separate income:** $20,000 #### Question: What is the amount of income from S reported in P’s income statement? **Options:** - a. $19,800 - b. $18,000 - c. $20,000 - d. $16,200 Select the correct option from the choices given. --- This information is designed to provide insights into financial accounting and consolidation practices for educational purposes.
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