If the Shareholders' Equity Allocated to the Subsidiary's Preference Shares

question 61

Multiple Choice

If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, what effect will the transaction have on consolidated shareholders' equity?

• A) Non-controlling interest will decrease by $144,000 and retained earnings will decrease by $6,000.
• B) Non-controlling interest will decrease by $144,000 and contributed surplus will increase by $6,000.
• C) Non-controlling interest will increase by $144,000 and retained earnings will increase by $6,000.
• D) There will be no change in consolidated shareholders' equity as a result of this transaction.

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