Partridge purchased a 60% interest in Sparrow on January 1, 2016, for $240,000.At the time of the purchase, Sparrow had the following stockholders' equity:
$$\begin{array} { l r }
\text { Common stock ( } \$ 10 \text { par) } & \$ 80,000 \
\text { Retained earnings } & \underline { 120,000 } \
\text { Total stockholders' equity } & \$ 200,000
\end{array}$$
Any excess is attributable to equipment with a 10-year life.On January 1, 2016, the retained earnings of Sparrow was $175,000.The entire investment was sold for $300,000 on January 1, 2016.The gain was ____.
A)$87,000
B)$90,000
C)$27,000
D)$78,000

Question

Partridge purchased a 60% interest in Sparrow on January 1, 2016, for $240,000.At the time of the purchase, Sparrow had the following stockholders' equity: 
$$\begin{array} { l r } 
\text { Common stock ( } \$ 10 \text { par) } & \$ 80,000 \
\text { Retained earnings } & \underline { 120,000 } \
\text { Total stockholders' equity } & \$ 200,000
\end{array}$$
 Any excess is attributable to equipment with a 10-year life.On January 1, 2016, the retained earnings of Sparrow was $175,000.The entire investment was sold for $300,000 on January 1, 2016.The gain was ____.
A)$87,000
B)$90,000
C)$27,000
D)$78,000

Quizplus · Accepted Answer

The Answer is A

Partridge Purchased a 60% Interest in Sparrow on January 1