Utah Company holds 80% of the stock of a subsidiary company. The subsidiary issues 100 additional shares of stock to Utah Company at a price above book value per share. The subsidiary does not issue any additional shares at the same time. How will Utah Company record the purchase?
A. Utah Company records a gain on sale of stock.
B. Utah Company increases additional paid-in capital.
C. Utah Company decreases additional paid-in capital.
D. Utah Company assigns any excess cost over book value acquired to increase undervalued identifiable assets or goodwill as appropriate.
Answer:D
Utah Company holds 80% of the stock of a subsidiary company. The subsidiary issues 100 additional shares of stock to Utah Company at a price above book value per share. The subsidiary does not issue any additional shares at the same time. How will Utah Company record the purchase?
A. Utah Company records a gain on sale of stock. B. Utah Company increases additional paid-in capital. C. Utah Company decreases additional paid-in capital. D. Utah Company assigns any excess cost over book value acquired to increase undervalued identifiable assets or goodwill as appropriate.