A parent company owns a controlling interest in a subsidiary whose stock has a book value of $31 per share. At the end of the current year, the subsidiary issues new shares entirely to outside parties at $45 per share. The parent still controls this subsidiary. Which of the following is true? LO4

a. Because the shares were all sold to outside parties, the parent’s investment account is not affected.

b. Because the parent now owns a smaller percentage of the subsidiary, the parent’s investment account must be reduced.

c. Because the shares were sold for more than book value, the parent’s investment account must be increased.

d. Because the sale was made at the end of the year, the parent’s investment account is not affected.