When a parent purchases a portion of the newly issued stock of its subsidiary in a private offering and the ownership interest decreases,
A)any difference between the change in equity and the price paid is the excess of cost or book value attributable to the new block.
B)any difference between the change in equity and the price paid is viewed as a gain or loss on the sale of an interest.
C)any difference between the change in equity and the price paid is viewed as a change in paid-in capital or retained earnings.
D)there will be no adjustment.

Question

When a parent purchases a portion of the newly issued stock of its subsidiary in a private offering and the ownership interest decreases,
A)​any difference between the change in equity and the price paid is the excess of cost or book value attributable to the new block.
B)​any difference between the change in equity and the price paid is viewed as a gain or loss on the sale of an interest.
C)​any difference between the change in equity and the price paid is viewed as a change in paid-in capital or retained earnings.
D)​there will be no adjustment.

Quizplus · Accepted Answer

When a parent company's ownership interest in a subsidiary decreases due to the subsidiary issuing new stock, any difference between the change in equity and the price paid is typically accounted for as a change in paid-in capital or retained earnings, not as a gain or loss.

When a Parent Purchases a Portion of the Newly Issued