A Parent Company Owns a 90% Interest in a Subsidiary

question 25

Multiple Choice

A parent company owns a 90% interest in a subsidiary at the start of the year and during the year sells a 10% interest to reduce its ownership percentage to 80%.The most popular view of the transaction under current consolidations theory is that

• A)​it is a sale of an investment at a gain or a loss.
• B)​it is likened to a treasury stock transaction that may not result in a gain or a loss.
• C)​it is a transaction between the controlling and non-controlling ownership interests and has no effect on consolidated income.The transaction would impact only paid-in capital.
• D)​the increase or decrease in equity as a result of the sale is an adjustment to donated capital.

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Definitions:

Subjective Well-being

An individual's personal assessment of their overall happiness and life satisfaction.

Relative Deprivation

The experience of feeling deprived of something to which one believes to have a right, particularly in comparison to others possessing it.

Adaptation-level Phenomenon

The tendency to judge new stimuli and experiences by comparing them to our past experiences, leading to a normalization of experiences.

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed, leading to decreased motivation and action.