Exam #2 acct 539 - controlling interest is retained. Book...

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539 Ex 2 Fall 09 Key 1. E 2. D 3. A 4. C 5. D 6. D 7. D 8. B 9. A 10. E 11. B 12. D 13. B 14. A 15. D 16. E 17. C 18. D 19. E 20. D 21. A
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22. C 23. A 24. 25. 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
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Unformatted text preview: controlling interest is retained. Book value equivalency prior to new issuance (90% x $600,000) $540,000 Book value of subsidiary after new issuance ($600,000 + $175,000) $775,000 Panton's ownership (23,000 shares/25,000 shares) x 92% Book value equivalency after new issuance $713,000 Investment account after new shares recorded (540,000 + $175,000) $715,000 Adjustment: Decrease investment and additional paid-in capital ($713,000 - $715,000) = $(2,000)...
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Exam #2 acct 539 - controlling interest is retained. Book...

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