On January 1, 2018, Stamford issues 10,000 additional shares of common stock for $25 per share. Neill acquires 8,000 of these shares. How will this transaction affect the parent company’s Additional Paid-In Capital account?

  a. Has no effect on it.
  b. Increases it by $20,500.
  c. Increases it by $36,400.
  d. Increases it by $82,300.

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 . . . . . . . . .                   $100,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . .                       75,000
Retained earnings, 1/1/17 . . . . . . . . . . . . . . . . . . . . . . .                     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, 2018, 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: