If a Subsidiary Issues Additional Common Shares at Below Book

question 106

Multiple Choice

If a subsidiary issues additional common shares at below book value to outsiders,which of the following statements is true?

• A)The parent's additional paid-in capital will be increased.
• B)The parent's investment in subsidiary will be increased.
• C)The parent's retained earnings will be increased.
• D)The parent's additional paid-in capital will be decreased.
• E)The parent's retained earnings will be decreased.

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Definitions:

ATC

Average Total Cost; the total cost of production divided by the quantity of output produced.

AVC

Average Variable Cost, which is the total variable cost divided by the quantity of output produced. It represents the variable cost per unit of output.

MC

Marginal Cost, which refers to the increase in total production cost that arises from producing one additional unit of a good or service.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs like opportunity costs.