Ryan Company Owns 80% of Chase Company Assume Chase Issues 30,000 Additional Shares Common Stock Solely to Presented

question 87

Multiple Choice

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011, are as follows: $\begin{array}{l}\text { Chase Company: }\\\begin{array}{lr}\text { Shares outstanding } & 50,000 \\\text { Book value } & \$ 400,000 \\\text { Book value per share } & \$ 8\\\\\text { Ryan Company: }\\\text { Shares owned of Chase } & 40,000 \\\text { Book value of investment in Chase } & \$ 320,000\end{array}\end{array}$ Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share.
-After acquiring the additional shares, what adjustment is needed for Ryan's investment in Chase account?

• A) $70,000 increase.
• B) $70,000 decrease.
• C) $15,000 increase.
• D) $15,000 decrease.
• E) No adjustment is necessary.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production process of a product and are considered a part of the finished product.

Direct Labor

The cost of wages paid to workers directly involved in the production of goods or services.

Job Order Cost Sheets

Documents that record and track the costs associated with a specific job or order.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used in creating the good.