If a subsidiary reacquires its outstanding shares from outside ownership for more than book value, which of the following statements is true?
A) Additional paid-in capital on the parent company's books will decrease.
B) Investment in subsidiary will increase.
C) Treasury stock on the parent's books will increase.
D) Treasury stock on the parent's books will decrease.
E) No adjustment is necessary.

Question

Quizplus · Accepted Answer

When a subsidiary reacquires its shares for more than book value, the excess paid over book value reduces the additional paid-in capital on the parent company's books.

If a Subsidiary Reacquires Its Outstanding Shares from Outside Ownership