The acquisition of treasury stock by a subsidiary from noncontrolling shareholders at a price above book value
A)decreases the parent's share of subsidiary book value and decreases the parent's ownership percentage.
B)decreases the parent's share of subsidiary book value and increases the parent's ownership percentage.
C)increases the parent's share of subsidiary book value and decreases the parent's ownership percentage.
D)increases the parent's share of subsidiary book value and increases the parent's ownership percentage.

Question

Quizplus · Accepted Answer

When a subsidiary acquires treasury stock from noncontrolling shareholders at a price above book value, the subsidiary's total equity decreases, which reduces the overall book value of the subsidiary. The parent's share of the subsidiary's book value also decreases, which reduces the parent's ownership percentage. Therefore, choice B is the best answer.

The Acquisition of Treasury Stock by a Subsidiary from Noncontrolling