Two Types of Intercompany Stock Purchases Significantly Complicate the Consolidation

question 21

Essay

Two types of intercompany stock purchases significantly complicate the consolidation process.The first occurs when the subsidiary issues added shares of stock in a public issue and the parent buys a portion of the shares.The second occurs when the subsidiary purchases outstanding shares of the parent company.
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Required:
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a.Discuss the current theoretical consolidation procedure for situations in which the parent buys a portion of the newly issued subsidiary shares that is (1) equal to its existing ownership percentage, (2) greater than its existing ownership percentage, and (3) less than its existing ownership percentage.?
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b.Discuss the most widely supported, current theoretical consolidation procedures used when the subsidiary purchases outstanding common stock shares of the parent.?

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Definitions:

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Demand Schedule

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