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.

---

Definitions:

Raw Materials

Unfinished goods or materials consumed in the manufacturing process to create a final product.

Currency Exchange Rates

The worth of a currency in exchange for a different currency.

Equivalent Amount

The equal value of currency or expression of a sum in a different form or denomination, maintaining its value.

C$ Strengthens

When the Canadian dollar increases in value compared to other currencies.