Which of the Following Statements Is Incorrect Regarding a Parent's

question 35

Multiple Choice

Which of the following statements is incorrect regarding a parent's purchase of additional subsidiary shares?

• A)There can never be an income statement gain or loss.
• B)​Due to the constraints of conservatism, there can never be an income statement gain but a loss should be recognized if so indicated.
• C)​If the price paid to reacquire the shares exceeds their book value, the debit first is used to reduce existing paid-in capital in excess of par from retirement and the balance is a debit to Retained Earnings.
• D)​If the price paid to reacquire the shares is less than their book value, there is a credit to paid-in capital in excess of par from retirement.

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Definitions:

Succession Planning

A strategic process for identifying and developing new leaders who can replace old leaders when they leave, retire, or die, ensuring the organization's continuity.

Significant

Something that is important, noteworthy, or has a considerable impact or effect.

Potential Successor

An individual or entity considered likely to take over a role, position, or responsibility in the future.

Exit Strategy

A plan developed by a business or individual to sell ownership in the company, cease operations, or otherwise dispose of its operations and assets.