Alpha Purchased an 80% Interest in Beta on June 30

question 9

Multiple Choice

Alpha purchased an 80% interest in Beta on June 30, 20X1. Both Alpha's and Beta's reporting periods end December 31. Which of the following represents the controlling interest in consolidated net income for 20X1?

• A)100% of Alpha's July 1-December 31 income plus 80% of Beta's July 1-December 31 income
• B)100% of Alpha's July 1-December 31 income plus 100% of Beta's July 1-December 31 income
• C)100% of Alpha's January 1-December 31 income plus 80% of Beta's July 1-December 31 income
• D)100% of Alpha's January 1-December 31 income plus 80% of Beta's January 1-December 31 income

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Definitions:

Oral Contracts

Agreements that are made verbally and are legally binding, though harder to prove than written contracts.

Written Confirmation

A document that records and verifies specific details of an agreement or transaction between two or more parties.

Merchant

An individual or company engaged in the wholesale purchase and retail sale of goods for profit.

Usage of Trade

Customary practices and usages that parties to a transaction in a particular trade commonly observe.