On January 1, 2018, a Subsidiary Bought 10% of the Outstanding

question 2

Multiple Choice

On January 1, 2018, a subsidiary bought 10% of the outstanding shares of its parent company.Although the total book value and fair value of the parent's net assets were $5.5 million, the consideration transferred for these shares was $590,000.During 2018, the parent reported separate net income of $714,000, before including investment income, while dividends declared were $196,000.How were these shares reported at December 31, 2018?

• A) The investment was recorded for $641,800 at the end of 2018 and then eliminated for consolidation purposes.
• B) Consolidated stockholders' equity was reduced by $641,800.
• C) The investment was recorded for $590,000 at the end of 2018 and then eliminated for consolidation purposes.
• D) Consolidated stockholders' equity was reduced by $639,800.
• E) Consolidated stockholders' equity was reduced by $590,000.

---

Definitions:

Performance Expectations

Standards and objectives set by employers or managers that employees are expected to achieve in their roles.

Heroes

Individuals admired for their courage, outstanding achievements, or noble qualities, often serving as inspirational figures.

Observable Culture

The visible and detectable layers of an organization’s culture, such as rituals, dress codes, and physical layout, which can give insights into deeper cultural values.

Diversity

The presence and acknowledgment of a wide range of distinct characteristics in a group of people, including culture, race, gender, age, etc.