Davidson, Inc

question 75

Multiple Choice

Davidson, Inc. owns 70 percent of the outstanding voting stock of Ernest Company. On January 2, 2011, Davidson sold 8 percent bonds payable with a $5,000,000 face value maturing January 2, 2031 at a premium of $400,000. On January 1, 2013, Ernest acquired 30 percent of these same bonds on the open market at 97.6. Both companies use the straight-line method of amortization. What adjustment should be made to Davidson's 2014 beginning Retained Earnings as a result of this bond acquisition?

• A) $114,000.
• B) $122,000.
• C) $136,000.
• D) $144,000.
• E) $152,000.

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Definitions:

Herbert Simon

An American economist, political scientist, and cognitive psychologist known for his research in the fields of decision-making and artificial intelligence, including the concept of "bounded rationality."

Assumptions

Accepted beliefs or statements taken to be true without proof, often serving as starting points for reasoning and decision-making processes.

Shortcuts

Methods or paths taken to simplify tasks, increase efficiency, or expedite processes.

Decision-Making Efficiency

The effectiveness and speed with which decisions are made, often emphasizing the quality of outcomes with minimal time and resources.