On January 1, 20X1, Paul, Inc. acquired a 90% interest in Stephan Company. The $45,000 excess of purchase price (parent's share only) was attributable to goodwill. On January 1, 20X3, Stephan Company had the following stockholders' equity: On January 2, 20X3, Stephan sold 2,000 additional shares in a private offering. Stephan issued the new shares for $70 per share; Paul, Inc. purchased 600 of the shares. As a result of this sale, there is a(n)
A)gain on the consolidated income statement of $5,000.
B)decrease in the controlling interest paid-in excess of $5,000.
C)increase in the controlling interest paid-in capital in excess of par of $5,000
D)increase in the controlling interest Retained Earnings of $5,000

Question

On January 1, 20X1, Paul, Inc. acquired a 90% interest in Stephan Company. The $45,000 excess of purchase price (parent's share only) was attributable to goodwill. On January 1, 20X3, Stephan Company had the following stockholders' equity:  On January 2, 20X3, Stephan sold 2,000 additional shares in a private offering. Stephan issued the new shares for $70 per share; Paul, Inc. purchased 600 of the shares. As a result of this sale, there is a(n)
A)gain on the consolidated income statement of $5,000. 
B)decrease in the controlling interest paid-in excess of $5,000. 
C)increase in the controlling interest paid-in capital in excess of par of $5,000 
D)increase in the controlling interest Retained Earnings of $5,000

Quizplus · Accepted Answer

11eb11de_92e8_e3de_ad38_871e68246e45_TB2014_00 ¹(9,000 + 600) ÷ (10,000 + 2,000) = 9,600 ÷ 12,000 = 80.00% ² Debit investment account; credit cash