On January 1,2009,a subsidiary bought 10% of the outstanding shares of its parent company.Although the total book value and fair value of the parent's net assets were $5.5 million,the consideration transferred for these shares was $590,000.During 2009,the parent reported operating income (no investment income was included)of $714,000 while paying dividends of $196,000.How were these shares reported at December 31,2009?

Question

Quizplus · Accepted Answer

The investment by the subsidiary in the parent company is treated as treasury stock for consolidation purposes, reducing consolidated stockholders' equity by the amount paid, which is $590,000.

On January 1,2009,a Subsidiary Bought 10% of the Outstanding Shares