The Following Information Pertains to Questions

question 18

Multiple Choice

The following information pertains to questions
Whine purchased 80% of the outstanding voting shares of Dine Inc.on December 31,2009.The Balance Sheets of both companies on that date are shown below: Chompster Inc. ,one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.As a result of the agreement,Dine Inc.would issue another 8,000 shares (over and above the 32,000 shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment which had a remaining useful life of ten years from the date of acquisition.
Whine Inc.uses the equity method to account for its investment in Dine Inc.There were no unrealized intercompany profits on December 31,2009.
-What would be the gain or loss arising from Dine's share issue to Chompster?

• A)A loss of $4,000
• B)A gain of $4,000
• C)A gain of $2,400
• D)A loss of $2,400

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Definitions:

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more useful comparison to actual costs.

Variable Costs

Expenses that fluctuate directly with changes in production volume or activity level, such as raw materials and direct labor costs.

Flexible Budgets

Budgets that can adjust or flex for changes in the volume of activity or other relevant factors, allowing for more accurate forecasts and analysis.