If a Parent Acquires All of the Additional Common Shares

question 107

Multiple Choice

If a parent acquires all of the additional common shares issued by its subsidiary at greater than book value,which of the following statements is true?

• A)The investment in subsidiary will decrease.
• B)Additional paid-in capital will decrease.
• C)Retained earnings will increase.
• D)The investment in subsidiary will increase.
• E)No adjustment will be necessary.

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Definitions:

Operating Activities

Business activities related to the day-to-day functions of producing goods, providing services, and selling products.

Paying Taxes

The mandatory financial charge or other levy imposed on an individual or a legal entity by a governmental organization in order to fund government spending and various public expenses.

Cash Outflow

The movement of money out of a business, resulting from expenses or investments.

Accounts Receivable

Outstanding amounts due from clients to a company for products sold or services utilized, awaiting payment.