Examlex

Solved

Webb Company Owns 90% of Jones Company Assume Jones Issues 20,000 New Shares of Its Common Stock

question 83

Multiple Choice

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011 are as follows:  Jones Company:  Shares outstanding 100,000 Book value of Jones $1,200,000 Book value per share $12 Webb Company:  Shares owned of Jones 90,000 Book value of investment $1,080,000\begin{array}{l}\text { Jones Company: }\\\begin{array}{lr}\text { Shares outstanding } & 100,000 \\\text { Book value of Jones } & \$ 1,200,000 \\\text { Book value per share } & \$ 12\end{array}\\\text { Webb Company: }\\\begin{array}{lr}\text { Shares owned of Jones } & 90,000 \\\text { Book value of investment } & \$ 1,080,000\end{array}\end{array} Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones.
-After acquiring the additional shares, what adjustment is needed for Webb's investment in Jones account?


Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Absorption Costing

A bookkeeping approach that encompasses all production expenses, including both constant and fluctuating costs, in the price of a good.

Unit Cost

The calculated cost assigned to a single unit of product or service, comprising all variable and fixed costs.

Mixed Cost

A cost that contains both fixed and variable components and changes in total with the level of activity, but not proportionately.

Related Questions