Emron Company Owns a 100% Interest in the Common Stock

question 20

Multiple Choice

Emron Company owns a 100% interest in the common stock of the Dietz Company. On January 1, 20X2, Emron sold Dietz a fixed asset that Dietz will use over a 5-year period. The asset was sold at a $5,000 profit. In the consolidated statements, this profit will

• A)not be recorded.
• B)be recognized over 5 years.
• C)be recognized in the year of sale.
• D)be recognized when the asset is resold to outside parties at the end of its period of use.

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Definitions:

Doctrine Of Respondeat Superior

This legal principle holds an employer or principal legally responsible for the wrongful acts of an employee or agent, performed within the scope of employment or agency.

Tortious Behavior

Actions that cause harm or loss to another person, leading to civil legal liability.

Landlord

An owner of property who rents it out to another party, known as a tenant, under an agreement.

Nonemployee Agent

An individual or entity that acts on behalf of another party in a business transaction but is not considered an employee.