Partridge Purchased a 60% Interest in Sparrow on January 1

question 30

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:
$$\begin{array} { l r } \text { Common stock } ( \$ 10 \text { par } ) & \$ 80,000 \\\text { Retained earnings } & \underline { 120,000 } \\\quad \text { Total stockholders' equity } & \$ 200,000\end{array}$$
Any excess is attributable to goodwill.On January 1, 2016, the retained earnings of Sparrow was $175,000.The entire investment was sold for $300,000 on January 1, 2016.At that date, Partridge had on hand inventory it had purchased from Sparrow for $50,000.Sparrow has a gross profit percentage of 40%.The gain (loss) was ____.

• A)$105,000
• B)$81,000
• C)$27,000
• D)$39,000

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Definitions:

Freudian Concept

A theory or idea developed by Sigmund Freud that relates to the psychoanalytic study of the human psyche, including the id, ego, and superego.

Id

In Freudian psychoanalysis, a part of the mind that is the source of instinctual impulses and demands for immediate satisfaction of primitive needs.

Trait Theory

A psychological approach that studies personality through the identification and measurement of specific characteristics or traits that define an individual's behavior consistently over time.

Traits

Characteristics or qualities that define an individual or thing, often distinguishing them from others.