Consider a sale of stock by a subsidiary to parties outside the consolidated entity.This transaction requires an adjustment of the parent's investment and additional paid-in capital accounts except when
A)the shares are sold below book value per share.
B)the shares are sold above book value per share.
C)the shares are sold at book value per share.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When shares are sold at book value per share, there is no gain or loss on the transaction, and therefore no adjustment is required to the parent's investment and additional paid-in capital accounts. If the shares are sold below book value per share, the parent's investment and additional paid-in capital accounts need to be adjusted downwards. If the shares are sold above book value per share, the parent's investment account needs to be adjusted upwards, and any excess paid by the purchaser would be recorded as additional paid-in capital.

Consider a Sale of Stock by a Subsidiary to Parties