Which of the Following Is Not a Related Party Transaction

question 18

Multiple Choice

Which of the following is not a related party transaction?

• A) Acme Corporation leases office space to Norton Company. Mr. and Mrs. Norton own Norton Company and 65% of Acme Corporation's stock.
• B) BBD Inc. licenses a patent from Nugo Inc., which owns 82% of BBD's outstanding stock.
• C) Beth Teal pays $15,000 a year to her gardener, Ben. Beth is Ben's grandmother.
• D) All the transactions are between related parties.

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Definitions:

Average Operating Assets

The average value of the assets used in the normal operations of a business over a period.

Stockholders' Equity

Stockholders' Equity is the portion of a company's assets that belongs to shareholders after all liabilities have been subtracted, also known as shareholders' equity.

Net Operating Income

Earnings from a company’s primary business activities, discounting the effects of financing and tax considerations.

Residual Income

The net operating income that an investment center earns above the minimum required return on its operating assets.