On January 1, 2016, P Corporation purchased 75% of S Corporation for $500,000. S's stockholders' equity on that date was equal to $600,000 and S had 40,000 shares issued and outstanding on that date. S Corporation sold an additional 8,000 shares of previously unissued stock on December 31, 2016. Assume that P Corporation purchased the additional shares what would be their current percentage ownership on December 31, 2016?
A) 62 1/2%.
B) 75%
C) 79 1/6%
D) 100%

Question

Quizplus · Accepted Answer

Before the additional shares were issued, P Corporation owned 75% of the original 40,000 shares, which is 30,000 shares. After S Corporation issued an additional 8,000 shares and P Corporation purchased these, P Corporation then owned 38,000 shares out of a total of 48,000 shares (40,000 original + 8,000 new). Therefore, P Corporation's percentage ownership is (38,000 / 48,000) * 100% = 79 1/6%.

On January 1, 2016, P Corporation Purchased 75% of S