Partridge Purchased a 60% Interest in Sparrow on January 1

question 4

Multiple Choice

Partridge purchased a 60% interest in Sparrow on January 1, 2016, for $240,000.At the time of the purchase, Sparrow had the following stockholders' equity:
$$\begin{array} { l r } \text { Common stock ( } \$ 10 \text { par) } & \$ 80,000 \\\text { Retained earnings } & \underline { 120,000 } \\\text { Total stockholders' equity } & \$ 200,000\end{array}$$
Any excess is attributable to equipment with a 10-year life.On January 1, 2016, the retained earnings of Sparrow was $175,000.During the first 6 months of 2016, $25,000 was earned by Sparrow.The entire investment was sold for $300,000 on July 1, 2016.The gain (loss) was ____.

• A)$87,000
• B)$78,000
• C)$12,000
• D)$60,000

---

Definitions:

Retested

The process of administering a test or assessment again to the same subject at a different time to evaluate changes, consistency, or reliability.

Regression Toward

A statistical phenomenon that suggests that extreme scores or extreme behavior are likely to be closer to the average on subsequent observations or attempts.

Illusion of Control

The overestimation of one's ability to control events or outcomes that are largely or entirely beyond their actual influence.

Standard Deviation

An indicator of the extent of variability or scatter among a collection of numbers.