On January 2,20X5,Ross Co

question 10

Multiple Choice

On January 2,20X5,Ross Co.acquired 90% of Singh Ltd.for $490,000.On that date,Singh's shareholders' equity totalled $420,000.Ross uses the equity method to record its investment.On the acquisition date,Ross sold a capital asset,with a remaining useful life of 10 years,to Singh for a gain of $14,000.At Ross's December 31,20X5 year-end,what is the amount of realized profit with respect to the sale of this capital asset? Ignore income taxes.

• A)$0
• B)$1,400
• C)$12,600
• D)$14,000

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Definitions:

Treasury Stock

Shares of a company's own stock held by the company itself, often bought back from shareholders and not considered when calculating earnings per share or dividends.

Retained Earnings

The portion of a company's profits that is not distributed to shareholders as dividends but is kept by the company for reinvestment.

Net Income

The final financial gain of a business once taxes and all expenses are subtracted from the overall income.

Cash Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.