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Gordon Co Reported Current Earnings of $580,000 While Paying $58,000 in in Cash

question 105

Multiple Choice

Gordon Co. reported current earnings of $580,000 while paying $58,000 in cash dividends. Lane Co. earned $150,000 in net income and distributed $15,000 in dividends. Gordon held a 75% interest in Lane for several years, an investment that it originally acquired by transferring consideration equal to the book value of the underlying net assets. Gordon used the initial value method to account for these shares.On January 1, 2021, Lane acquired in the open market $75,000 of Gordon's 8% bonds. The bonds had originally been issued several years ago at a price that would yield a 10% effective interest rate. On the date of the bond purchase, the book value of the bonds payable was $68,200. Lane paid $66,000 based on a 12% effective interest rate over the remaining life of the bonds.What is the noncontrolling interest's share of the subsidiary's net income?

Comprehend the compatibility and accessibility options for electronic document formats.

Learn basic document editing and formatting conventions, including text insertion direction, working with images, and utilizing the Standard toolbar for printing.

Understand the concept and significance of dividends and how they relate to shareholder value.

Calculate dividend yield and understand its importance in investment decisions.

Definitions:

Monopsonistic Employer

A labor market condition where a single employer significantly controls the market for workers and can dictate terms of employment.

Competitive Market

A market structure characterized by a large number of buyers and sellers where no single participant can significantly influence price.

MRP of Labor

Marginal Revenue Product of Labor; the additional revenue generated by employing one more unit of labor.

Monopsonist

A market condition where there is only one buyer for a particular product or service, giving that buyer significant power over prices.