Which of the Following Is Correct? the Direct Sale of Additional

question 17

Multiple Choice

Which of the following is correct? The direct sale of additional shares of stock at book value per share to only the parent company from a subsidiary

• A)decreases the parent's interest and decreases the noncontrolling shareholders' interest.
• B)decreases the parent's interest and increases the noncontrolling shareholders' interest.
• C)increases the parent's interest and increases the noncontrolling shareholders' interest.
• D)increases the parent's interest and decreases the noncontrolling shareholders' interest.

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Definitions:

Equity Method

An accounting technique used to reflect the investment in another company, typically applied when the investor has significant influence over the investee but does not fully control it.

Acquisition Differential

The excess of the cost of an acquired company over the fair value of its identifiable net assets at the time of acquisition.

Impairment Loss

The reduction in the recoverable value of an asset below its carrying amount, necessitating an adjustment on the financial statements.

Cost Method

An accounting method used to record investments, where the investment is recorded at cost and income is recognized only when dividends are received.