When a Parent Purchases a Portion of the Newly Issued

question 41

Multiple Choice

When a parent purchases a portion of the newly issued stock of its subsidiary in a private offering and the ownership interest decreases,

• 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:

Subpoena Duces Tecum

A legal order requiring a person to produce documents, records, or tangible evidence for a court proceeding.

Statutory Limits

refer to the maximum or minimum amount of something that is legally permitted, as established by statute.

Judicial Limits

Restrictions and boundaries set on the powers and authority of courts and judges.

Political Limits

Boundaries set by legal and governmental systems that define the extent of political actions, powers, or influence.