Panton, Inc. acquired 18,000 shares of Glotfelty Corp. several years ago. At the present time, Glotfelty is reporting the following stockholders' equity:
Glotfelty issues 5,000 shares of previously unissued stock to Panton for $35 per share.
Required: Describe how this transaction would affect Panton's books.
The investment price is above the book value of the subsidiary. In this case, however, the additional amount has been paid by the parent company, not by an outside party. Because the payment is made by Panton, the investment account will need an adjustment after recording the cost of the new shares. A change in ownership is accounted for as an equity transaction when controlling interest is retained.

Question

Panton, Inc. acquired 18,000 shares of Glotfelty Corp. several years ago. At the present time, Glotfelty is reporting the following stockholders' equity:  
Glotfelty issues 5,000 shares of previously unissued stock to Panton for $35 per share.
Required: Describe how this transaction would affect Panton's books.
The investment price is above the book value of the subsidiary. In this case, however, the additional amount has been paid by the parent company, not by an outside party. Because the payment is made by Panton, the investment account will need an adjustment after recording the cost of the new shares. A change in ownership is accounted for as an equity transaction when controlling interest is retained.

Quizplus · Accepted Answer

The Answer of Panton, Inc. acquired 18,000 shares of Glotfelty Corp. several years ago. At the present time, Glotfelty is reporting the following stockholders' equity:  
Glotfelty issues 5,000 shares of previously unissued stock to Panton for $35 per share.
Required: Describe how this transaction would affect Panton's books.
The investment price is above the book value of the subsidiary. In this case, however, the additional amount has been paid by the parent company, not by an outside party. Because the payment is made by Panton, the investment account will need an adjustment after recording the cost of the new shares. A change in ownership is accounted for as an equity transaction when controlling interest is retained.