What would be Y adjusted net income for the year

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Reference no: EM132739884

Question - X Inc. owns 80% of Y Inc. During 2020, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end.

Y Inc. sold Inventory to X Inc. for $5,000. 40% of this inventory remained in X's warehouse at year end.

Both companies are subject to a tax rate of 40%. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its Investment in Y Inc.

Assume that Y Inc. reported an after-tax net income of $20,000 in 2020, what would be Y's adjusted net income for the year?

a. $20,000

b. $19,760

c. $19,840

d. $202,400

Reference no: EM132739884

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