Use the following information to answer the question(s) below.

On December 31, 2013, Giant Corporation's Investment in Penguin Corporation account had a balance of $500,000. The balance consisted of 80% of Penguin's $625,000 stockholders' equity on that date. Giant owns 80% of Penguin. On January 2, 2014, Penguin increased its outstanding common stock from 15,000 to 18,000 shares.

-Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2,2014.Giant's percentage ownership immediately after the sale of additional stock would be
A)66-2/3%.
B)75%.
C)80%.
D)83-1/3%.

Question

Use the following information to answer the question(s) below.

On December 31, 2013, Giant Corporation's Investment in Penguin Corporation account had a balance of $500,000. The balance consisted of 80% of Penguin's $625,000 stockholders' equity on that date. Giant owns 80% of Penguin. On January 2, 2014, Penguin increased its outstanding common stock from 15,000 to 18,000 shares.

-Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2,2014.Giant's percentage ownership immediately after the sale of additional stock would be
A)66-2/3%.
B)75%.
C)80%.
D)83-1/3%.

Quizplus · Accepted Answer

Before the sale of additional stock, Giant owned 80% of Penguin's 15,000 shares, which is 12,000 shares. After Penguin issued 3,000 more shares to outside interests, the total number of shares increased to 18,000. Giant still owns 12,000 shares, but now out of 18,000 shares, which is 12,000/18,000 = 2/3 or 66-2/3%.

Use the Following Information to Answer the Question(s) Below