Jax Company Used the Acquisition Method When It Acquired Its

question 15

Multiple Choice

Jax Company used the acquisition method when it acquired its investment in Saxton Company. Jax now sells some of its shares of Saxton such that neither control nor significant influence exists. Which of the following statements is true?

• A) The difference between selling price and acquisition value is recorded as a realized gain or loss.
• B) The difference between selling price and acquisition value is recorded as an unrealized gain or loss.
• C) The difference between selling price and carrying value is recorded as a realized gain or loss.
• D) The difference between selling price and carrying value is recorded as an unrealized gain or loss.
• E) The difference between selling price and carrying value is recorded as an adjustment to retained earnings.

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Definitions:

Discount Period

The time frame within which a buyer can pay less than the full amount due by taking advantage of a discount offered by the seller.

Discounted Note

A promissory note that is sold or redeemed for less than its face value before its maturity date.

Discount Amount

The reduced amount from the original price of goods or services, often provided as an incentive or for early payment.

Discounted Note

A promissory note sold at a discount from its face value, where the difference between the purchase price and the value at maturity represents the interest income for the investor.