Chapter 9, Problem 9.7Q

To determine

Change in parent’s ownership: the parent company can change ownership ratio by purchasing or selling shares of the subsidiary in transaction with unaffiliated companies. a subsidiary can change the parent’s ownership percentage by selling additional shares to or repurchase shares from unaffiliated parties. When parent sells a subsidiary share to non-affiliate a gain or loss normally occurs and is recorded on the seller’s books when a company disposes of all or part of an investment. ASC 323 deals explicitly with sales of stock of investee, requiring recognition of a gain or loss on the difference between the selling price and the carrying amount of the stock.

To explain : how parent purchase of additional common shares of its subsidiary above the book value reflects in consolidated financial statements.