Jax Company Uses the Acquisition Method for Accounting for Its

question 41

Multiple Choice

Jax Company uses the acquisition method for accounting for its investment in Saxton Company. Jax sells some of its shares of Saxton such that neither control nor significant influence exists. Which of the following statements is true?

• A) The difference between selling price and acquisition value is recorded as a realized gain or loss.
• B) The difference between selling price and acquisition value is recorded as an unrealized gain or loss.
• C) The difference between selling price and carrying value is recorded as a realized gain or loss.
• D) The difference between selling price and carrying value is recorded as an unrealized gain or loss.
• E) The difference between selling price and carrying value is recorded as an adjustment to retained earnings.

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Definitions:

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