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:

Double-Declining-Balance

A method of accelerated depreciation that calculates depreciation expenses by doubling the straight-line rate.

Accumulated Depreciation

The cumulative sum of depreciation expense assigned to a physical asset since its initial use, representing its cost allocation.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations.

Floral Deliveries

The service or business of transporting flowers or floral arrangements to specified locations or recipients.