Pager Corporation Acquires 30% of the Outstanding Voting Common Shares

question 45

Multiple Choice

Pager Corporation acquires 30% of the outstanding voting common shares of the Intercomm Corporation for $600,000.Pager Corporation acquires the investment in Intercomm Corporation by buying previously issued shares of Intercomm Corporation from other investors. Suppose that Intercomm Corporation reports earnings of $100,000 and pays dividends of $40,000, during the next accounting period.As a result, Pager Corporation's entries are:

• A)Equity in Earnings of Affiliate ..........30,000
• Investment in Stock of Intercomm Corporation ...........30,000
• Investment in Stock of Intercomm Corporation.........12,000
• Cash.................... 12,000
• B)Investment in Stock of Intercomm Corporation ...............30,000
• Equity in Earnings of Affiliate ............... 30,000
• Cash.................... 12,000
• Investment in Stock of Intercomm Corporation............12,000
• C)Equity in Earnings of Affiliate ..............100,000
• Investment in Stock of Intercomm Corporation ....... . . 100,000
• Cash.............. 12,000
• Investment in Stock of Intercomm Corporation.........12,000
• D)Investment in Stock of Intercomm Corporation ...............100,000
• Equity in Earnings of Affiliate ................ 100,000
• Cash................... 12,000
• Investment in Stock of Intercomm Corporation.............12,000
• E)Investment in Stock of Intercomm Corporation ...........30,000
• Investment Revenue............... 30,000
• Cash..................... 12,000
• Investment in Stock of Intercomm Corporation...........12,000

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Definitions:

Fantasy Analogy

Using imaginative scenarios or fictional stories to explain or understand real-life situations, often to simplify complex concepts.

Personal Analogy

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