REFERENCE: Ref.06_02 Stoop Co.owned 80% of the Common Stock of Knight Co.Knight

question 25

Multiple Choice

REFERENCE: Ref.06_02
Stoop Co.owned 80% of the common stock of Knight Co.Knight had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding.Each preferred share received an annual per share dividend of $10 and is convertible into four shares of common stock.Stoop did not own any of Knight's preferred stock.Knight also had 600 bonds outstanding,each of which is convertible into ten shares of common stock.Knight's annual after-tax interest expense for the bonds was $22,000.Stoop did not own any of Knight's bonds.Knight reported income of $300,000 for 2009.
-Campbell Inc.owned all of Gordon Corp.For 2009,Campbell reported net income (without consideration of its investment in Gordon) of $280,000 while the subsidiary reported $112,000.The subsidiary had bonds payable outstanding on January 1,2009,with a book value of $297,000.The parent acquired the bonds on that date for $281,000.During 2009,Campbell reported interest income of $31,000 while Gordon reported interest expense of $29,000.What is consolidated net income for 2009?

• A)$406,000.
• B)$374,000.
• C)$378,000.
• D)$410,000.
• E)$394,000.

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Definitions:

Repression

A defense mechanism where unwanted thoughts or desires are unconsciously pushed out of conscious awareness.

Defense Mechanism

A defense mechanism is a psychological strategy unconsciously used to protect oneself from anxiety arising from unacceptable thoughts or feelings.

Anxiety-Arousing Thoughts

Internal cognitions or thoughts that trigger or increase feelings of anxiety, fear, or unease.

Reaction Formation

A defense mechanism where an individual behaves in a way that is opposite to their true feelings or desires.