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Parent Co. owns 90% of the 10,000 outstanding shares of Subsidiary Co.'s common stock on December 31, year 1. On that date, the stockholders' equity
Parent Co. owns 90% of the 10,000 outstanding shares of Subsidiary Co.'s common stock on December 31, year 1. On that date, the stockholders' equity of Subsidiary was $150,000, consisting of $100,000 of no-par common stock and $50,000 of retained earnings. On January 2, year 2, Subsidiary issued 2,000 previously unissued shares for $24,000 to various outside investors. As a consequence of this transaction, Parent's ownership share was reduced to 75%. Which of the following correctly reports this transaction? a b. Parent's investment in Subsidiary is reduced by $4,500. Parent's investment in Subsidiary is increased by $3,000. The consolidated income statement reports a loss of $7,500. The consolidated income statement reports a gain of $4,000. C d
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