On January 1, 2016, Paul, Inc.acquired a 90% interest in Stephan Company.The $45,000 excess of purchase price (parent's share only) was attributable to goodwill.On January 1, 2018, Stephan Company had the following stockholders' equity:
$\begin{array}{lr}
\text { Common stock, } \$ 10 \text { par } & \$ 100,000 \
\text { Other paid-in capital } & 200,000 \
\text { Retained earnings } & 300,000
\end{array}$

On January 2, 2018, Stephan sold 2,000 additional shares in a private offering.Stephan issued the new shares for $70 per share; Paul, Inc.purchased 600 of the shares.As a result of this sale, there is a(n)
A)gain on the consolidated income statement of $5,000.
B)decrease in the controlling interest paid-in excess of $5,000.
C)increase in the controlling interest paid-in capital in excess of par of $5,000
D)increase in the controlling interest Retained Earnings of $5,000

Question

On January 1, 2016, Paul, Inc.acquired a 90% interest in Stephan Company.The $45,000 excess of purchase price (parent's share only) was attributable to goodwill.On January 1, 2018, Stephan Company had the following stockholders' equity: 
$\begin{array}{lr}
\text { Common stock, } \$ 10 \text { par } & \$ 100,000 \
\text { Other paid-in capital } & 200,000 \
\text { Retained earnings } & 300,000
\end{array}$

On January 2, 2018, Stephan sold 2,000 additional shares in a private offering.Stephan issued the new shares for $70 per share; Paul, Inc.purchased 600 of the shares.As a result of this sale, there is a(n)
A)gain on the consolidated income statement of $5,000.
B)decrease in the controlling interest paid-in excess of $5,000.
C)increase in the controlling interest paid-in capital in excess of par of $5,000
D)increase in the controlling interest Retained Earnings of $5,000

Quizplus · Accepted Answer

The sale of new shares for $70 per share resulted in an increase in paid-in capital in excess of par, since the par value of the shares was not stated. Since Paul, Inc. purchased 600 of the shares, their share of the increase would be 90% of $5,000, or $4,500. This represents an increase in controlling interest paid-in capital in excess of par of $5,000. There is no gain on the consolidated income statement, and there is no decrease in controlling interest paid-in excess or increase in Retained Earnings.

On January 1, 2016, Paul, Inc On January 2, 2018, Stephan Sold 2,000 Additional Shares in Stephan