Sun and Moon Corporations Each Have Only One Class of Stock

question 98

Multiple Choice

Sun and Moon Corporations each have only one class of stock outstanding.Their stock ownership is shown below. Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations? (Assume the two corporations are equally valued.)

• A)No stock ownership change is required.
• B)Arthur or Brenda acquire an additional 10% of Sun Corporation.
• C)Charles must acquire an additional 5% of Moon Corporation.
• D)Arthur must acquire an additional 30% of Moon Corporation.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity, including income statement, balance sheet, and cash flow statement.

Cash Basis

An accounting method where revenue and expenses are recognized only when cash is received or paid.

Revenues

The total amount of money received by a company from its business activities, such as sales of products or services, before any deductions.

Revenue Recognition Principle

An accounting principle that determines the specific conditions under which revenue is recognized and recorded.