Up Company owns 60% of SideCo, and Down Company owns
the other 40% of SideCo. Up Company and Down Company
are competitors in the same market. Which one of the
following sets reflects the most likely level of influence each
company has over SideCo?
Question 11
On July 1, 2005, Casa Development Co. purchased a tract of
land for $1,200,000. Casa incurred additional costs of $300,000
during the remainder of 2005 in preparing the land for sale.
The tract was subdivided into residential lots as follows: Using
the relative sales value method, what amount of costs should be
allocated to the Class A lots?
Question 12
On January 2 of the current year, Cruises, Inc. borrowed $3
million at a rate of 10% for three years and began construction
of a cruise ship. The note states that annual payments of
principal and interest in the amount of $1.3 million are due
every December 31. Cruises used all proceeds as a down
payment for construction of a new cruise ship that is to be
delivered two years after the start of construction. What
should Cruise report as interest expense related to the note in
its income statement for the second year?
Question 13
Puff Co. acquired 40% of Straw, Inc.'s voting common stock
on January 2, 2005, for $400,000. The carrying amount of
Straw's net assets at the purchase date totaled $900,000. Fair