The Purchase by a Subsidiary of Some of Its Shares

question 24

Multiple Choice

The purchase by a subsidiary of some of its shares from the noncontrolling stockholders results in an increase in the parent's percentage interest in the subsidiary. The parent company's share of the subsidiary's net assets will increase if the shares are purchased:

• A) at a price equal to book value.
• B) at a price below book value.
• C) at a price above book value.
• D) will not show an increase.

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Definitions:

Functional Lines

Functional lines refer to the various departments or units within an organization, each with specific responsibilities and roles.

Functional Expertise

Refers to the specific knowledge and skills that enable an individual to excel in a particular job or industry.

Economies of Scale

Cost advantages that a business obtains due to expansion, where the average cost per unit of output decreases with the increase in scale of production.

Functional Organizations

A type of organizational structure that groups employees based on their specialized roles or functions.