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Question: On January 1, Balanger Company buys 10


On January 1, Balanger Company buys 10 percent of the outstanding shares of its parent, Altgeld, Inc. Although the total book and fair values of Altgeld’s net assets equaled $3.2 million, the price paid for these shares was $340,000. During the year, Altgeld reported $415,000 of separate operating income (no subsidiary income was included) and declared dividends of $35,000. How are the shares of the parent owned by the subsidiary reported at December 31?
a. Consolidated stockholders’ equity is reduced by $340,000.
b. An investment balance of $378,000 is eliminated for consolidation purposes.
c. Consolidated stockholders’ equity is reduced by $378,000.
d. An investment balance of $358,000 is eliminated for consolidation purposes.

2.99

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