Scenario 4-1 Stroud Corporation Is an 80%-Owned Subsidiary of Pennie, Inc., Acquired

question 27

Multiple Choice

Scenario 4-1
Stroud Corporation is an 80%-owned subsidiary of Pennie, Inc., acquired by Pennie several years ago. On January 1, 20X2, Pennie sold land with a book value of $60,000 to Stroud for $90,000. Stroud resold the land to an unrelated party for $100,000 on September 26, 20X3.
-Refer to Scenario 4-1. The gain from sale of land that will appear in the consolidated income statements for 20X2 and 20X3, respectively, is ____.

• A) $0 and $10,000
• B) $0 and $40,000
• C) $30,000 and $10,000
• D) $30,000 and $40,000

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Definitions:

Cumulative Gain

The total amount of gain or profit accumulated over a specific period of time.

Rate of Return

The percentage of profit or loss on an investment over a specified period.

Capital Gain Yield

The rise in the price of a security, like a stock or bond, leading to a profit if sold; expressed as a percentage increase over the investment's cost.

Income Yield

The return on an investment in terms of the income generated, expressed as a percentage of the investment's cost.