Bates LtdOwns 60% of the Outstanding Common Shares of Sam Ltd

Multiple Choice

Bates Ltd.owns 60% of the outstanding common shares of Sam Ltd.During 20X6,sales from Sam to Bates were $200,000.Merchandise was priced to provide Sam with a gross margin of 20%.Bates' inventories contained $40,000 at December 31,20X5 and $15,000 at December 31,20X6 of merchandise purchased from Sam.Cost of goods sold for Bates and Sam for 20X6 on their separate-entity income statements were as follows:

What is cost of goods sold on the consolidated income statement for 20X6?

A) $687,000
B) $680,000
C) $685,600
D) $660,000