A Parent Company Owns a 70 Percent Interest in a Subsidiary

question 51

Multiple Choice

A parent company owns a 70 percent interest in a subsidiary whose stock has a book value of $27 per share. The last day of the year, the subsidiary issues new shares for $27 per share, and the parent buys its 70 percent interest in the new shares. Which of the following statements is true?

• A) Since the sale was made at the end of the year, the parent's investment account is not affected.
• B) Since the shares were sold for book value, the parent's investment account must be increased.
• C) Since the shares were sold for book value, the parent's investment account must be decreased.
• D) Since the shares were sold for book value and the parent bought 70 percent of the shares, the parent's investment account is not affected except for the price of the new shares.
• E) None of the above.

Explain the concept of derived demand in the context of resource markets.

Describe the impact of market structures (pure competition vs. imperfect competition) on resource demand and pricing.

Assess the implications of elasticity of resource demand and the factors influencing it.

Understand how changes in productivity affect resource demand and the factors contributing to productivity changes.

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Definitions:

Content Morpheme

refers to a morpheme that carries semantic content, as opposed to a grammatical function, such as nouns, verbs, adjectives, and adverbs.

Function Morpheme

A type of morpheme that provides grammatical relationships between words in a sentence.

Pseudo Morpheme

A unit of sound or a part of a word that appears to have meaning or function as a morpheme but does not qualify as one in the language structure.

Morphemes

The smallest units of meaning in a language, which can be a single word, prefix, or suffix.