ABC IncAcquired 40% of the Voting Shares of DEF Inc

question 58

Multiple Choice

ABC Inc.acquired 40% of the voting shares of DEF Inc.for $200,000 on January 1,2001.On that date,DEF's Common Shares and Retained Earnings were worth $240,000 and $60,000 respectively.On that date,DEF's Book Values approximated their Fair Values except for DEF's Inventory,which had a market value $50,000 higher than book value,and DEF's Plant & Equipment,which was said to have a market value that was $80,000 higher than its book value.The inventory was subsequently sold to outsiders during the year.The Plant and Equipment had a remaining useful life of ten years from the acquisition date.During the year,DEF earned net income and paid Dividends in the amount of $100,000 and $10,000,respectively.
-What would be the carrying value of ABC's Investment in DEF on January 31,2001?

• A)$200,000
• B)$300,000
• C)$290,000
• D)$212,800

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Definitions:

Price Elasticity

A concept related to elasticity of demand, specifically measuring how much the quantity demanded of a good responds to changes in its price.

Marginal Cost

The expenditure associated with creating a subsequent unit of a product or service.

Subsidy

A financial contribution or support given by a government or institution to lower the price of a good or service, often intended to encourage production or consumption, reduce costs, or support industries.

Cost Schedule

A detailed listing showing the various quantities of a good or service and the associated costs of producing them.