A Subsidiary Issues New Shares of Common Stock at an Amount

question 1

Multiple Choice

A subsidiary issues new shares of common stock at an amount below book value. Outsiders buy all of these shares. Which of the following statements is true?

• A) The parent's additional paid-in capital will be increased.
• B) The parent's investment in subsidiary will be increased.
• C) The parent's retained earnings will be increased.
• D) The parent's additional paid-in capital will be decreased.
• E) The parent's retained earnings will be decreased.

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Definitions:

Adversary

An opponent or competitor in a conflict or contest.

Monetary Rewards

Financial or material compensations given to employees as recognition for their work or performance.

Micromanagement

A controlling style of management where a leader closely observes or controls the work of their subordinates, often with excessive attention to minor details.

Competition

The rivalry between entities for resources, recognition, or victory in which superior performance is rewarded.