Point CoPurchased 90% of Sharpe Corp

question 26

Multiple Choice

Point Co.purchased 90% of Sharpe Corp.'s voting stock on January 1,20X2 for $5,580,000.Prior to the acquisition,Point held a 10% equity position in Sharpe Company.On January 1,20X2 Pointe's 10% investment in Sharpe has a book value of $340,000 and a fair value of $620,000.On January 1,20X2 Point records the following:

• A)Debit Gain on revaluation of Sharpe's stock $280,000
• B)Credit Gain on revaluation of Sharpe's stock $280,000
• C)Credit Investment in Sharpe stock $5,860,000
• D)Debit Investment in Sharpe stock $6,200,000

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Definitions:

Special Journal

A type of accounting journal that is used for recording and categorizing a specific type of transaction which occurs frequently.

General Journal

A primary accounting record used to record all types of transactions except for those related to specific tasks, such as sales or purchases, which have their own journals.

General Ledger Control Account

A General Ledger Control Account is a summary account that consolidates the total balances of all accounts in a subsidiary ledger, used to maintain integrity in financial reporting.

Subsidiary Ledger

A detailed ledger that contains the individual accounts with a common characteristic, supporting entries recorded in a general ledger.