Duncan Inc

question 12

Multiple Choice

Duncan Inc. owned all of the outstanding stock of Brandt Co. The subsidiary had bonds payable outstanding on January 1, 2020, with a book value of $270,000. The parent acquired the bonds on that date for $291,000. Subsequently, Duncan reported interest income of $26,000 in 2020 while Brandt reported interest expense of $31,000. Consolidated financial statements were prepared for 2021. What adjustment would be required for the retained earnings balance as of January 1, 2021?

• A) Reduction of $5,000.
• B) Reduction of $16,000.
• C) Reduction of $26,000.
• D) Reduction of $31,000.
• E) Reduction of $57,000.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equates to the quantity supplied by producers, leading to market balance.

Surplus

The amount by which the quantity of something exceeds its demand, often referring to unsold goods or surplus budget in economics.

Quantity Demanded

The sum total of a particular good or service that consumers are inclined and financially equipped to acquire at a determined price range within a given period.

Quantity Supplied

The volume of a commodity or service that producers are prepared and able to supply at a specified price within a certain timeframe.