# Consolidated Operating Expenses Calculation ## Step 1: Find Separate Operating Expenses From the financial statements: **Pride's Operating Expenses:** $28,000- **Strong Operating Expenses:**14,000 **Subtotal:** $28,000 (Pride) + $14,000 (Strong) = **$42,000** --- ## Step 2: Consider Intercompany Transactions ### Inventory Transaction - Pride sold inventory to Strong: **Cost to Pride:** $112,000, **Sale to Strong:** $140,000 - Only half the inventory purchase price ($112,000) had been remitted back to Pride by year-end. - At December 31, 2024, **60% of these goods remain in inventory** (i.e., not yet sold to a third party). ### Eliminate Unrealized Profit in Ending Inventory - Unrealized profit = Intercompany profit remaining in ending inventory - Intercompany profit per item = Sale price - Cost = $140,000 - $112,000 = $28,000 - Total profit earned by Pride on sale to Strong = $28,000 - Percentage of inventory remaining at year-end = 60% - Unrealized profit = $28,000 × 60% = **$16,800** This **unrealized profit** is already included in Pride's income and Strong's inventory, so we need to eliminate it for consolidation. ### Operating Expenses The inventory transaction affects **cost of goods sold**, not operating expenses. **No adjustment to operating expenses** is needed for the intercompany inventory transaction in this context. --- ## Step 3: Consolidated Operating Expenses - Add operating expenses of both companies. - **No elimination or adjustment is required for operating expenses.** \[ \text{Consolidated Operating Expenses} = \$28,000 + \$14,000 = \$42,000 \] --- ## Step 4: Match to Choices The answer choices are: - $35,000 - $47,600 - $49,000 - $42,000 - $53,200 **$42,000** matches our calculation. --- # Final Summary **The total consolidated operating expenses at December 31, 2024, are \$42,000.** This includes both Pride and Strong's operating expenses, with no intercompany adjustment needed for operating expenses. **Final Answer:** \[ \boxed{ \$42,000 } \]

# Consolidated Operating Expenses Calculation - Summary Steps ## Step 1: Find Separate Operating Expenses Pride's operating expenses total $28,000, while Strong's operating expenses are $14,000. The subtotal of both companies' operating expenses is $42,000. ## Step 2: Consider Intercompany Transactions Pride sold inventory to Strong for $140,000, while the cost to Pride was $112,000, with 60% of this inventory remaining unsold at year-end. The unrealized profit of $16,800 needs to be eliminated from the consolidation, but it does not affect operating expenses. ## Step 3: Consolidated Operating Expenses Operating expenses are simply the sum of both companies' expenses, which totals $42,000. No adjustments for intercompany transactions are necessary in this context. ## Step 4: Match to Choices The calculated consolidated operating expenses of $42,000 match one of the provided answer choices. This confirms the accuracy of the calculation. # Final Summary The total consolidated operating expenses at December 31, 2024, are $42,000. This amount reflects the combined operating expenses of Pride and Strong without any need for intercompany adjustments.