Company P owns 80% of the 10,000 outstanding common stock of Company S.If Company S issues 2,500 added shares of common stock, and Company P purchases some of the newly issued shares, which of the following statements is true?
A)Other than recording the purchase, there is no adjustment to the controlling interest if the parent purchases all the shares issued.
B)Other than recording the purchase, there is no adjustment to the controlling interest if the parent does not purchase any of the shares issued.
C)Other than recording the purchase, there is no adjustment to the controlling interest if the parent purchases 80% of the shares issued.
D)There is a new excess of cost over book value or excess of book value over cost if the parent purchases 80% of the newly issued shares.

Question

Company P owns 80% of the 10,000 outstanding common stock of Company S.If Company S issues 2,500 added shares of common stock, and Company P purchases some of the newly issued shares, which of the following statements is true?
A)​Other than recording the purchase, there is no adjustment to the controlling interest if the parent purchases all the shares issued.
B)​Other than recording the purchase, there is no adjustment to the controlling interest if the parent does not purchase any of the shares issued.
C)​Other than recording the purchase, there is no adjustment to the controlling interest if the parent purchases 80% of the shares issued.
D)There is a new excess of cost over book value or excess of book value over cost if the parent purchases 80% of the newly issued shares.

Quizplus · Accepted Answer

If Company P purchases 80% of the newly issued shares (2,000 out of 2,500), it maintains its 80% ownership in Company S. Therefore, there's no adjustment to the controlling interest, aside from recording the purchase.

Company P Owns 80% of the 10,000 Outstanding Common Stock