On January 1, Balanger Company buys 10 percent of the outstanding shares of its
ID: 2409285 • Letter: O
Question
On January 1, Balanger Company buys 10 percent of the outstanding shares of its parent, Altgeld, Inc. Although the total book and fair values of Altgeld’s net assets equaled $3.2 million, the price paid for these shares was $340,000. During the year, Altgeld reported $415,000 of separate operating income (no subsidiary income was included) and declared dividends of $35,000. How are the shares of the parent owned by the subsidiary reported at December 31?
A. Consolidated stockholders’ equity is reduced by $340,000.
B. An investment balance of $378,000 is eliminated for consolidation purposes.
C. Consolidated stockholders’ equity is reduced by $378,000.
D. An investment balance of $358,000 is eliminated for consolidation purposes.
Explanation / Answer
the shares of the parent owned by the subsidiary reported at December 31,
A. Consolidated stockholders’ equity is reduced by $340,000(price paid for the shares).
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