If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably), then
A. there will be an adjustment to additional paid-in capital if the stock is sold above book value.
B. there will be no adjustment to additional paid-in capital regardless whether the stock is sold above or below book value.
C. there will be an adjustment to additional paid-in capital if the stock is sold below book value.
D. there will be the elimination of a gain.
Answer:B
If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably), then
A. there will be an adjustment to additional paid-in capital if the stock is sold above book value. B. there will be no adjustment to additional paid-in capital regardless whether the stock is sold above or below book value. C. there will be an adjustment to additional paid-in capital if the stock is sold below book value. D. there will be the elimination of a gain.