On january 1, 2018, race corp. acquired 80% of the voting common stock of gallow inc. during the year, race sold to gallow for $450,000 goods that cost $330,000. at year-end, gallow owned 15% of the goods transferred. gallow reported net income of $204,000, and race's net income was $806,000. race decided to use the equity method to account for this in

Consolidated income: 954,800 dollars

Explanation:

Gallow income x race participation:

    $   204,000    x   80%   = $ 163,200

The gross profit in the infra-entity transaction will be eliminated

$ 450,000 - $ 330,000 = $ 120,000 gross profit

15% remains at Gallow so: $ 120,000 x 15% = $ 18,000 gross profit for the unsold inventory.

We now multiply by Race participation: $ 18,000 x 80% = $ 14,400 unrealized gain.

Consolidated income:

Race income:   806,000

Gallo income    163, 200

unrealized gain (14, 400)

Total:                954,800

the answer is d

explanation:

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return