When a Parent Purchases a Portion of the Newly Issued

question 18

Multiple Choice

When a parent purchases a portion of the newly issued stock of its subsidiary and the ownership interest increases,

• A)​any difference between the change in equity and the price paid is the excess of cost or book value attributable to the new block.
• B)​any difference between the change in equity and the price paid is viewed as a gain or loss on the sale of an interest.
• C)​any difference between the change in equity and the price paid is viewed as a change in paid-in capital or retained earnings.
• D)​there will be no adjustment.

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Definitions:

Income from Operations

The profit realized from a business's ongoing operations, calculated before taxes and interests, reflecting the efficiency of the core business activities.

Service Department Charges

These are the costs allocated to the production departments from service departments within a company, assisting in accurately assessing the cost of production.

Income from Operations

An alternative term for Operating Income, highlighting earnings generated from a company's regular business activities.

Gross Profit

The income a company retains after subtracting the costs directly associated with production but before deducting operating expenses.