Danny Company owned 80% of Zelda Incorporated. The Investment in Zelda account had a balance of $1,000,000,
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Question:
Danny Company owned 80% of Zelda Incorporated. The Investment in Zelda account had a balance of $1,000,000, and the subsidiary's 10,000 shares had an underlying book value of only $100 per share. On January 1, 2024, Beta issued 2,500 new shares to the public for 40$ per share. How does this transaction affect the Investment in Zelda account? 1. It should be decreased by $96,000. 2. It should be increased by $96,000. 3. It should be increased by $9,500. 4. It should be decreased by $9,500. 5. It is not affected since the shares were sold to outside parties.
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