On January 1, 2013, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: The balance in Riney's Investment in Garvin Co. account was $552,000, and the non-controlling interest was $138,000. On January 1, 2013, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares.
What is the balance in Investment in Garvin Co. after the sale of the 10,000 shares of common stock?
A) $552,000.
B) $560,000.
C) $460,000.
D) $404,000.
E) $672,000.

Question

On January 1, 2013, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances:  The balance in Riney's Investment in Garvin Co. account was $552,000, and the non-controlling interest was $138,000. On January 1, 2013, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares.
What is the balance in Investment in Garvin Co. after the sale of the 10,000 shares of common stock?
A) $552,000. 
B) $560,000. 
C) $460,000. 
D) $404,000. 
E) $672,000.

Quizplus · Accepted Answer

$250,000/$5 = 50,000 shares × .80 = 40,000 shares owned by parentTotal Equity at Acquisition = $690,000 + Equity Added by Stock Offering (10,000 × $15) $150,000 = Total Equity after Stock Offering $840,000 × 40,000 Parent/60,000 Total = $560,000 Parent's Investment Account