Question - Eagle owns 80% of Flyway's common stock that was purchased at its underlying book value. The two companies report the following information for 2004 and 2005. During 2004, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2004, 30% of the inventory was unsold. In 2005, the remaining inventory was resold outside the consolidated entity.
2004 Selected Data: Eagle Flyaway
Sales Revenue $600,000 $320,000
Cost of Goods Sold $320,000 $155,000
Other Expenses $100,000 $89,000
Net Income $180,000 $76,000
Dividends Paid $19,000 $0
2005 Selected Data:
Sales Revenue $580,000 $445,000
Cost of Goods Sold $300,000 $180,000
Other Expenses $130,000 $171,000
Net Income $150,000 $94,000
Dividends Paid $16,000 $5,0000
For 2004, controlling share of consolidated net income is what amount if the intercompany sale was downstream?
a) $256,000.
b) $237,800.
c) $238,400.
d) $253,000.