Highland Company Buys 70 Percent of the Stock of Danner

question 8

Multiple Choice

Highland Company buys 70 percent of the stock of Danner Company of $91,000.Danner Company has contributed capital of $70,000 and retained earnings of $60,000.The consolidated financial statements would contain

• A) goodwill but not minority interest.
• B) neither minority interest nor goodwill.
• C) minority interest and goodwill.
• D) minority interest but not goodwill.

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Definitions:

Periodic Inventory System

An inventory valuation method where the ending inventory and cost of goods sold are determined at the end of the accounting period.

Subsidiary Ledger

A detailed ledger that contains the individual accounts related to a specific category, supplementing the general ledger.

Consignment

An arrangement where goods are left with a third party to sell, but ownership remains with the supplier until the goods are sold.

Consignee

The retailer in a consigned inventory arrangement.