The Net Incomes for Parent and Sub Inc for the Year

question 56

Multiple Choice

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. The Shareholders' Equity section of Parent's Consolidated Balance Sheet on the date of acquisition would total what amount under the Entity Method?

• A) $140,000
• B) $185,000
• C) $244,000
• D) $270,000

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Definitions:

Restrictive Covenant

A clause in a contract or deed that limits what the owner of the property can do with it, often to preserve the value of adjacent land.

Minor

A person who is below the age of majority, legally considered a child and, in many contexts, does not have the full legal rights of an adult.

Public Policy

The public good; some acts, although not illegal, will not be enforced by the courts because they are socially distasteful (against public policy).

Legal Capacity

The ability of an individual or entity to enter into legally binding contracts, including being of a certain age and sound mind.