Parent Has Purchased Additional Shares of Subsidiary Stock

question 33

Multiple Choice

Parent has purchased additional shares of subsidiary stock.If the original investment blocks are carried at cost, the conversion to simple equity is based upon

• A)​the difference in subsidiary retained earnings at the beginning of the current fiscal year and the retained earnings when the first block was acquired.
• B)​the difference in subsidiary retained earnings at the beginning of the current fiscal year and the retained earnings when the block giving a controlling interest was acquired.
• C)​the difference in subsidiary retained earnings at the beginning of the current fiscal year and the retained earnings of each block at its acquisition.
• D)​the difference in subsidiary retained earnings at the beginning of the current fiscal year and the retained earnings when the last block was acquired.

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Definitions:

M

The money supply—currency, checking deposits, and check-like deposits (identical to M1).

Real GDP

Gross Domestic Product adjusted for inflation, which provides a more accurate reflection of an economy's size and growth rate over time.

GDP

Short for Gross Domestic Product, it's the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

MV

An abbreviation that can stand for "Market Value," representing the current price at which an asset or service can be bought or sold.