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

Paggle Corporation owns 80% of Spillway Inc.'s common stock 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. image text in transcribed

If the sale referred to above was a downstream sale, by what amount must Inventory on the consolidated balance sheet be reduced to reflect the correct balance as of the end of 2014?

$20,000

$3,000

$14,000

$10,000

2014 Selected Data Sales Revenue Cost of Goods Sold Other Expenses Net Income Dividends Paid 2015 Selected Data: Sales Revenue Cost of Goods Sold Expenses Net Income Dividends Paid $600,000 320.000 100.000 $180,000 19,000 Paggle $580,000 300,000 130,000 $150,000 16000 Spillway $320,000 155,000 89,000 $76,000 Spillwa $445,000 180,000 171.000 $94,000 5.000

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