The stockholders' equities of Pop Corporation and its 80 percent-owned subsidiary, Son Corporation, on December 31, 2016, appear as follows (in thousands):

Pop's Investment in Son account on this date is equal to its underlying book value. On January 1, 2017, Son issues 30,000 previously unissued common shares for $20 per share.
REQUIRED
1. If Pop purchases the 30,000 shares directly from Son, what is Pop's percentage ownership in Son after the new shares are acquired?
2. If Son sells the 30,000 previously unissued common shares to the public, what is Pop's percentage ownership in Son after the new issuance?
3. If Son sells the 30,000 shares to the public, prepare the journal entry on Pop's books to account for the effect of the issuance on its Investment in Son account assuming that no gain or loss is recognized.

Transcribed Image Text:

Pop Son Common stock, $10 p Retained earnings $5,000 2,000 $7,000 $2,200 1,000 $3,200 ar Total