In Order to Reduce the Risk Associated with a New

question 26

Multiple Choice

In order to reduce the risk associated with a new line of business, Conservative Corporation established Spin Company as a wholly owned subsidiary. It transferred assets and accounts payable to Spin in exchange for its common stock. Spin recorded the following entry when the transaction occurred:

-Based on the preceding information,what was Conservative's book value of assets transferred to Spin Company?

• A) $243,000
• B) $263,000
• C) $221,000
• D) $201,000

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Definitions:

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Journal Entry

A journal entry is a record in accounting that logs a business transaction and shows the debit and credit balances affected in the financial statements.

Salary Allocation

The process of distributing an employee's compensation among various accounts or departments based on where or how their time was spent or services were utilized.

Dissolution

The process of legally dissolving a business entity, which includes disbanding its operations and distributing its assets.