P Corporation acquired an 80% interest in S Corporation on January 1, 2014, when the book values of S assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of S net assets. During 2014, P sold merchandise that cost $70,000 to S for $86,000. On December 31, 2014, one-fourths of the merchandise acquired from P remained in S inventory. Separate incomes (investment income not included) of the two companies are as follows:

P S

Sales Revenue 180,000 160,000

Cost of Goods Sold 120,000 90,000

Operating Expenses 17,000 21,000

Separate incomes 43,000 49,000

What is P income from S for 2014?

Select one:

a. $36,000

b. $43,200

c. $39,200

d. $35,200

UPstream sale is a sale by a parent to a subsidiary

Select one:

True

False