Tray CoReported Current Earnings of $560,000 While Paying $56,000 in Cash

question 49

Multiple Choice

Tray Co.reported current earnings of $560,000 while paying $56,000 in cash dividends.Sparrish Co.earned $140,000 in net income and distributed $14,000 in dividends.Tray held a 70% interest in Sparrish for several years, an investment that it originally acquired by transferring consideration equal to the book value of the underlying net assets.Tray used the initial value method to account for these shares. On January 1, 2018, Sparrish acquired in the open market $70,000 of Tray's 8% bonds.The bonds had originally been issued several years ago at a price that would yield a 10% effective interest rate.On the date of the bond purchase, the book value of the bonds payable was $67,600.Sparrish paid $65,200 based on a 12% effective interest rate over the remaining life of the bonds.
What is the noncontrolling interest's share of the subsidiary's net income?

• A) $42,000.
• B) $37,800.
• C) $39,600.
• D) $40,070.
• E) $44,080.

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Definitions:

Psychoanalysis

A therapeutic approach focusing on uncovering and understanding unconscious motivations and conflicts.

Carl Jung

A Swiss psychiatrist and psychoanalyst who founded analytical psychology and introduced concepts such as archetypes and the collective unconscious.

Alfred Adler

An Austrian psychiatrist known for founding the school of Individual Psychology and his theories on personality, inferiority complex, and social interest.

Sigmund Freud

The founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.