When a parent acquires the preferred stock of a subsidiary, there will be a constructive retirement and
A. any difference paid above the book value of the preferred stock reduces the parent’s additional paid-in capital.
B. any difference paid above the book value of the preferred stock reduces the subsidiary’s retained earnings.
C. any difference paid above the book value of the preferred stock increases the parent’s additional paid-in capital.
D. any difference paid above the book value of the preferred stock increases the parent’s retained earnings.
Answer:A
When a parent acquires the preferred stock of a subsidiary, there will be a constructive retirement and
A. any difference paid above the book value of the preferred stock reduces the parent’s additional paid-in capital. B. any difference paid above the book value of the preferred stock reduces the subsidiary’s retained earnings. C. any difference paid above the book value of the preferred stock increases the parent’s additional paid-in capital. D. any difference paid above the book value of the preferred stock increases the parent’s retained earnings.