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Chapter 8--Subsidiary Equity Transactions, Indirect Subsidiary Ownership, and Subsidiary Ownership of Parent Shares Chapter 8--Subsidiary Equity Transactions, Indirect Subsidiary Ownership, and Subsidiary Ownership of Parent Shares Student: ___________________________________________________________________________ 1. A parent company owns a 100% interest in a subsidiary. Recently, the subsidiary paid a 10% stock dividend. The dividend should be recorded on the books of the parent A. at the par value or stated value of the shares received. B. at the market value of the shares on the date of declaration. C. at the market value of the shares on the date of distribution. D. merely as a memo entry indicating that the cost of the original investment now is allocated to a greater number of shares. 2. Company P purchased a 80% interest in the Company S on January 1, 20X1, for $600,000. Any excess of cost is attributed to the Company's building with a 20-year life. The equity balances of Company S are as follows: January 1, 20X1 December 31, 20X4 Common stock, $10 par $100,000 $140,000 Other paid-in capital 200,000 280,000 Retained earnings 250,000 450,000 The only change in paid-in capital is a result of a 40% stock dividend paid in 20X3. The cost to simple equity conversion to bring the investment account to its December 31, 20X4, balance is ____. A. $30,000 B. $136,000 C. $160,000 D. $256,000 3. When the parent purchases some newly issued shares of a subsidiary, any adjustments resulting from the subsidiary stock sales should be made A. at the end of the current fiscal year when the worksheet is prepared. B. at the time of the sale when the equity method is used. C. at the time of the sale if the cost method is used. D. retroactively to the start of the current fiscal year. 4. On January 1, 20X1, Paris Ltd. paid $600,000 for its 75% interest in the Scott Company when Scott had total equity of $550,000. Any excess of cost over book value was attributed to equipment with a 10-year life. On January 1, 20X3, Scott Company had the following stockholders' equity: Common stock, $10 par $100,000 Other paid-in capital 200,000 Retained earnings 350,000 On January 2, 20X3, Scott Company sold 2,500 additional shares of stock for $90 each in a private offering to noncontrolling shareholders. As a result of this sale, which of the following changes would appear in the 20X3 consolidated statements? A. $7,500 gain B. $37,500 loss C. $7,500 increase in controlling paid-in capital D. $37,500 decrease in controlling paid-in capital 5. On January 1, 20X1, Paris Ltd. paid $600,000 for its 75% interest in the Scott Company when Scott had total equity of $550,000. Any excess of cost over book value was attributed to equipment with a 10-year life. On January 1, 20X3, Scott Company had the following stockholders' equity: Common stock, $10 par $100,000 Other paid-in capital 200,000 Retained earnings 350,000 On January 2, 20X3, Scott Company sold 2,500 additional shares of stock for $60 each in a private offering to noncontrolling shareholders. As a On January 2, 20X3, Scott Company sold 2,500 additional shares of stock for $60 each in a private offering to noncontrolling shareholders.... View Full Document

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