A New Subsidiary Is Being Formed

question 2

Multiple Choice

A new subsidiary is being formed.The parent company purchased 70% of the shares for $20 per share.The remaining shares were sold to a variety of outside interests for an average of $18 per share.The consolidated statements will show

• A)​a gain.
• B)​a loss.
• C)​only cash and related equity.
• D)​goodwill.

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Definitions:

Costs

Costs represent the expenses incurred in the production of goods or services, including materials, labor, and overhead.

Benefits

Advantages or favorable outcomes derived from actions, policies, or circumstances.

Assumption

A basic condition or premise believed to be true without proof for the purpose of reasoning and decision-making.

Hypothesis

A suggested theory formulated from minimal evidence intended as an initial step for more in-depth inquiry.