Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017, when Stamford has the following stockholders’ equity accounts: Common stock—40,000 shares outstanding . . . . . . . $100,000Additional paid-in capital . . . . 75,000Retained earnings, 1/1/17 . . . 540,000Total stockholders’ equity . . . $715,000 To acquire this interest in Stamford, Neill pays a total of $592,000. The acquisition-date fair value of the 20 percent noncontrolling interest was $148,000. Any excess fair value was allocated to goodwill, which has not experienced any impairment.On January 1, 2018, Stamford reports retained earnings of $620,000. Neill has accrued the increase in Stamford’s retained earnings through application of the equity method. On January 1, 2018, Stamford issues 10,000 additional shares of common stock for $15 per share. Neill does not acquire any of this newly issued stock. How does this transaction affect the parent company’s Additional Paid-In Capital account?a. Has no effect on it.b. Increases it by $44,000.c. Decreases it by $35,200.d. Decreases it by $55,000.
Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017,
when Stamford has the following
Common stock—40,000 shares outstanding . . . . . . . $100,000
Additional paid-in capital . . . . 75,000
Total stockholders’ equity . . . $715,000
To acquire this interest in Stamford, Neill pays a total of $592,000. The acquisition-date fair value of the 20 percent noncontrolling interest was $148,000. Any excess fair value was allocated to
On January 1, 2018, Stamford issues 10,000 additional shares of common stock for $15 per share. Neill does not acquire any of this newly issued stock. How does this transaction affect the parent company’s Additional Paid-In Capital account?
a. Has no effect on it.
b. Increases it by $44,000.
c. Decreases it by $35,200.
d. Decreases it by $55,000.
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