Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value.

Question:

Paggle owns 80% of Spillway Inc.'s that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2014 and 2015.During 2014, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2014, 30% of the inventory was unsold. In 2015, the remaining inventory was resold outside the consolidated entity.

Unit Sales Price Unit Variable Costs $12 $8 Hoes Shovels 15 16 Rakes

If the sale referred to above was a downstream sale, the total sales revenue reported in the consolidated income statement for 2014 would be
a) $870,000.
b) $970,000.
c) $880,000.
d) $920,000.

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