Utah Company Holds 80% of the Stock of a Subsidiary

question 32

Multiple Choice

Utah Company holds 80% of the stock of a subsidiary company.The subsidiary issues 100 additional shares of stock to Utah Company at a price above book value per share.The subsidiary does not issue any additional shares at the same time.How will Utah Company record the purchase?

• A)Utah Company records a gain on sale of stock.
• B)Utah Company increases additional paid-in capital.
• C)Utah Company decreases additional paid-in capital.
• D)Utah Company assigns any excess cost over book value acquired to increase undervalued identifiable assets or goodwill as appropriate.

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Definitions:

Napoleonic Wars

A series of major conflicts pitting the French Empire and its allies, led by Napoleon Bonaparte, against a fluctuating array of European powers.

Trading

The act of buying, selling, or exchanging goods, services, or financial instruments within domestic or international markets.

East India Company

A historic English company formed in 1600 for the exploitation of trade with East and Southeast Asia and India, operating with a monopoly on English trade in the East Indies.

Shipbuilding Technology

The development and application of methods, tools, and materials for constructing ships, improving efficiency, durability, and navigability.