A New Subsidiary Is Being Formed

question 2

Multiple Choice

A new subsidiary is being formed.The parent company purchased 70% of the shares for $20 per share.The remaining shares were sold to a variety of outside interests for an average of $18 per share.The consolidated statements will show

• A)​a gain.
• B)​a loss.
• C)​only cash and related equity.
• D)​goodwill.

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Definitions:

Quantity Variances

The difference between the expected and actual number of units used or produced, which can affect costing and budgeting assessments.

Price Variance

The difference between the actual price paid for a purchase and the standard or expected price, usually applied to direct materials or direct labor costs.

Quantity Variance

A measure of the difference between the expected and actual quantities used in production, affecting materials or labor.

Overhead Absorbed

The overhead rate multiplied by standard units of volume.