On January 1, 2021, Stamford issues 10,000 additional shares of common stock for $25 per share. Neill

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On January 1, 2021, 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, 2020, when Stamford has the following stockholders’ equity accounts:

Common stock—40,000 shares outstanding . . . . . . . . . . . . . . . . . . . . . .$ 100,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Retained earnings, 1/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  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, 2021, Stamford reports retained earnings of $620,000. Neill has accrued the increase in Stamford’s retained earnings through application of the equity method. 

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Advanced Accounting

ISBN: 9781260247824

14th Edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

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