Question

Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2016, Thomson acquired a building with a 10-year life for $460,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2018, Thomson sold this building to Stayer for $430,400. At that time, the building had a remaining life of eight years but still no expected salvage value.What is the consolidated total for inventory at December 31?

a. $240,000
b. $248,000
c. $250,000
d. $260,000

Answer 1

To calculate the consolidated total for inventory at December 31, subtract the portion of the building sold to Stayer from the original cost of the building. Option B, $248,000, is the correct answer.

Step-by-step explanation:

To calculate the consolidated total for inventory at December 31, we need to consider the transactions involving the building. Thomson Corporation sold the building to Stayer, Incorporated on January 1, 2018, for $430,400. Since Thomson owns 70 percent of Stayer, we can multiply the selling price by 70% to determine the portion of the selling price that Thomson is responsible for.

70% x $430,400 = $301,280

Therefore, the consolidated total for inventory at December 31 is the original cost of the building minus the portion sold to Stayer. The original cost of the building was $460,000, so:

$460,000 - $301,280 = ${{460000 - 301280 = $158,720}}

Thus, the consolidated total for inventory at December 31 is $158,720. Therefore, option B, $248,000, is the correct answer.