On January 1, 2013, Stamford issues 10,000 additional shares of common stock for $15 per share. Neill does not acquire any of this newly issued stock. How does this transaction affect the parent company's Additional Paid-In Capital account?

a. Has no effect on it.

b. Increases it by $44,000.

c. Decreases it by $35,200.

d. Decreases it by $55,000.

Neill Company purchases 80 percent of the common stock of Stamford Company on January 1,

2012, when Stamford has the following stockholders' equity accounts:

Common stock-40,000 shares outstanding . . . . . . . . . . . . . . . . . $100,000

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000

Retained earnings, 1/1/12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,000

Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $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, 2013, Stamford reports retained earnings of $620,000. Neill has accrued the increase in Stamford's retained earnings through application of the equity method.

View the following problems as independent situations: