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Problem 6-22 (LO 6-7) Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017, when Stamford has the following
Problem 6-22 (LO 6-7) 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 Additional paid-in capital Retained earnings, 1/1/17 Total stockholders' equity $ 100,000 75,000 540,000 $ 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 reacquires 8,000 of the outstanding shares of its own common stock for $24 per share. None of these shares belonged to Neill. How does this transaction affect the parent company's Additional Paid-In Capital account? Multiple Choice Decreases it by $35,000. Decreases it by $55,000. Has no effect on it Decreases it by $28,000
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