_____When a subsidiary issues additional common stock to the public at more than the book value per share:
A) The parent has an increase in its equity in the subsidiary's net assets, which is reported as a gain under the economic unit concept.
B) The parent has an increase in its equity in the subsidiary's net assets, which is reported as Additional Paid-in Capital under the parent company concept.
C) The parent has a decrease in its equity in the subsidiary's net assets, which is reported as a loss under the parent company concept.
D) The parent has a decrease in its equity in the subsidiary's net assets, which is reported as a reduction to Additional Paid-in Capital under the economic unit concept.
E) None of the above.

Question

Quizplus · Accepted Answer

When a subsidiary issues additional common stock to the public at more than the book value per share, it does not directly affect the parent's equity in the subsidiary's net assets in the ways described in options A, B, C, and D. The transaction primarily affects the subsidiary's equity structure, increasing its common stock and additional paid-in capital. The parent's share of ownership might be diluted if the parent does not purchase additional shares, but this is not described accurately by any of the provided options.

_____When a Subsidiary Issues Additional Common Stock to the Public