The Royal Motor Company Manufactures Automobiles

question 15

Multiple Choice

The Royal Motor Company manufactures automobiles.Nonmanagement employees of the company can buy a new automobile for Royal's cost plus 2%.The automobiles are sold to dealers at cost plus 20%.Generally, management employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer's cost.Which of the following statements is correct?

• A)The nonmanagement employees who buy automobiles at a discount are not required to recognize income from the purchase.
• B)None of the employees who take advantage of the fringe benefits described above are required to recognize income.
• C)Employees of Royal are required to recognize as gross income 18% (20% - 2%) of the cost of the automobile purchased.
• D)All of these.
• E)None of these.

Prepare and interpret consolidated balance sheets, income statements, and statements of retained earnings incorporating subsidiary operations.

Understand the significance and treatment of non-controlling interests in consolidated financial statements.

Apply the cost method for investment accounting in parent and subsidiary relationships.

Demonstrate the effect of intercompany transactions on the consolidated financial statements.

---

Definitions:

Gene Expression

The process by which information from a gene is used to synthesize a functional gene product, often a protein.

DNA Base Sequences

The order of nucleotide bases (adenine, thymine, cytosine, and guanine) in a DNA molecule that determines genetic information.

Gene Frequencies

The ratio of a particular allele to the total of all other alleles of the same gene in a given population.

Evolution

A change in gene frequencies within a population over many generations; a mechanism by which genetically influenced characteristics of a population may change.