Use the following information for Questions 19-21.
On January 1, 2009, Pharma Company purchased 16,000 of the 20,000 outstanding common shares of Sludge Company for $760,000.On January 1, 2013, Pharma Company sold 2,000 of its shares of Sludge Company on the open market for $90 per share.Sludge Company's stockholders' equity on January 1, 2009, and January 1, 2013, was as follows:
1/1/09 1/1/13 The difference between implied and book value is assigned to Sludge Company's land.
-The amount of the gain on sale of the 2,000 shares that should be recorded on the books of Pharma Company is
A)$34,000.
B)$85,000.
C)$48,000.
D)$100,000.
E)None of these.

Question

Use the following information for Questions 19-21.
On January 1, 2009, Pharma Company purchased 16,000 of the 20,000 outstanding common shares of Sludge Company for $760,000.On January 1, 2013, Pharma Company sold 2,000 of its shares of Sludge Company on the open market for $90 per share.Sludge Company's stockholders' equity on January 1, 2009, and January 1, 2013, was as follows:
1/1/09 1/1/13  The difference between implied and book value is assigned to Sludge Company's land.
-The amount of the gain on sale of the 2,000 shares that should be recorded on the books of Pharma Company is
A)$34,000. 
B)$85,000. 
C)$48,000. 
D)$100,000. 
E)None of these.

Quizplus · Accepted Answer

The Answer is B

Use the Following Information for Questions 19-21