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.

---

Definitions:

Inventory Period

The average time it takes for a company to convert its inventory into sales.

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business.

Controller

A senior financial officer within a company responsible for overseeing accounting operations, financial reporting, and internal controls.