Popper Co Acquired 80% of the Common Stock of Cocker Co

question 64

Multiple Choice

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2019, when Cocker had the following stockholders' equity accounts. To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2022.Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2022, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker.On January 1, 2022, Cocker issued 10,000 additional shares of common stock for $35 per share. Popper acquired 8,000 of these shares. How would this transaction affect the additional paid-in capital of the parent company?

• A)Increase it by $28,700.
• B)Increase it by $16,800.
• C)$0.
• D)Increase it by $280,000.
• E)Increase it by $593,600.

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Definitions:

Traceable Fixed Expenses

Fixed costs that can be directly associated with a specific product, department, or segment of a business.

Common Fixed Expenses

Recurring expenses that do not vary with the level of production or sales, shared by multiple departments or products.

Promotional Campaign

A series of marketing efforts intended to increase awareness or sales of a product or service.

Store Segment Margin

The profit generated by a specific retail store or division after direct costs are subtracted, but before corporate overhead expenses are allocated.