Two Types of Intercompany Stock Purchases Significantly Complicate the Consolidation

question 21

Essay

Two types of intercompany stock purchases significantly complicate the consolidation process.The first occurs when the subsidiary issues added shares of stock in a public issue and the parent buys a portion of the shares.The second occurs when the subsidiary purchases outstanding shares of the parent company.
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Required:
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a.Discuss the current theoretical consolidation procedure for situations in which the parent buys a portion of the newly issued subsidiary shares that is (1) equal to its existing ownership percentage, (2) greater than its existing ownership percentage, and (3) less than its existing ownership percentage.?
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b.Discuss the most widely supported, current theoretical consolidation procedures used when the subsidiary purchases outstanding common stock shares of the parent.?

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Definitions:

Coupon

In finance, a coupon refers to the interest payment received by a bondholder from the bond issuer at specified intervals.

Yield To Maturity

The total return expected on a bond if it is held until its maturity date, considering all interest payments and capital gains or losses.

Market Price

The present market valuation at which an asset or service can be sold or bought.

Coupon

In finance, a coupon refers to the annual interest payment paid to bondholders, typically expressed as a percentage of the face value.