Blue Company owns 80 percent of the common stock of White Corporation.During the year,Blue reported sales of $1,000,000,and White reported sales of $500,000,including sales to Blue of $80,000.The amount of sales that should be reported in the consolidated income statement for the year is:
A) $500,000.
B) $1,300,000.
C) $1,420,000.
D) $1,500,000.

Question

Quizplus · Accepted Answer

In a consolidated financial statement, intercompany transactions are eliminated to avoid double counting. Since Blue owns 80% of White, only 20% of White's sales ($100,000) are not attributable to Blue. Therefore, the consolidated sales would be:

Sales of Blue + Sales of White - Sales from white to Blue = Consolidated Sales
$1,000,000 + $500,000 - $80,000 = $1,420,000

Blue Company Owns 80 Percent of the Common Stock of White