A Subsidiary Issues New Shares of Common Stock at an Amount

question 1

Multiple Choice

A subsidiary issues new shares of common stock at an amount below book value. Outsiders buy all of these shares. Which of the following statements is true?

• A) The parent's additional paid-in capital will be increased.
• B) The parent's investment in subsidiary will be increased.
• C) The parent's retained earnings will be increased.
• D) The parent's additional paid-in capital will be decreased.
• E) The parent's retained earnings will be decreased.

Appreciate the role of standards and variances in efficient production and cost control.

Understand the concepts of standard costs and how they are used in budgeting and variance analysis.

Distinguish between different types of variances, including direct labor time variance, direct labor rate variance, and direct materials quantity variance.

Recognize the calculation and interpretation of favorable and unfavorable variances.

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Definitions:

Phi Phenomenon

The visual trick of seeing ongoing movement in distinct items observed quickly one after the other.

Recency Effect

The tendency to remember the most recently presented information best, which can affect how memories are retrieved.

Chunking Effect

A memory strategy that involves grouping information into manageable units or "chunks" to enhance the ability to remember it.

Relearning

The process of learning material or skills previously studied then forgotten, often occurring more quickly than the initial learning.