8.On January 1, 2006, Parent Company purchased 32,000 of the 40,000 outstanding

Question

8.On January 1, 2006, Parent Company purchased 32,000 of the 40,000 outstanding common shares of Sims Company for $1,520,000. On January 1, 2010, Parent Company sold 4,000 of its shares of Sims Company on the open market for $90 per share. Sims Company’s stockholders’ equity on January 1, 2006, and January 1, 2010, was as follows: 1/1/061/1/10 Common stock, $10 par value$400,000$ 400,000 Other contributed capital400,000400,000 Retained earnings 800,000 1,400,000 $1,600,000$2,200,000 The difference between implied and book value is assigned to Sims Company’s land. The amount of the gain on sale of the 4,000 shares that should be recorded on the books of Parent Company is a.$68,000. b.$170,000. c.$96,000. d.$200,000. e.None of these.

Explanation / Answer

Answer is (b) : 1,70,000

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