REFERENCE: Ref.01_16 Renfroe,Inc.acquires 10% of Stanley Corporation on January 1,2007,for $90,000 When

question 28

Multiple Choice

REFERENCE: Ref.01_16
Renfroe,Inc.acquires 10% of Stanley Corporation on January 1,2007,for $90,000 when the book value of Stanley was $ 1,000,000.During 2007,Stanley reported net income of $215,000 and paid dividends of $50,000.On January 1,2008,Renfroe purchased an additional 30% of Stanley for $325,000.Any excess of cost over book value is attributable to goodwill with an indefinite life.During 2008,Renfroe reported net income of $320,000 and paid dividends of $50,000.
-How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1,2008?

• A)A debit of $16,500.
• B)A debit of $21,500.
• C)A debit of $90,000.
• D)A debit of $165,000.
• E)There is no adjustment.

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Definitions:

Disposable Income

The financial capabilities households have for saving and spending endeavors post income tax deductions.

Consumption

The use of goods and services by households, including the acquisition of goods and services for personal use or ownership.

Induced Consumption

The portion of consumer spending that increases or decreases as disposable income increases or decreases, respectively.

Disposable Income

The collective fiscal pool available to households for spending and saving post income tax engagements.