A subsidiary sells additional shares of its common stock to a nonaffiliate at a price that...
A subsidiary sells additional shares of its common stock to a nonaffiliate at a price that is higher than the previous book value per share. How does the sale benefit the existing shareholders? I would like to obtain a more in depth explanation of this scenario.
Homework Answers
When a subsidiary sells additional shares of its common stock, it causes a change in equity and is recorded as a capital transaction, no loss or gain is recognized on the sale because it has never an impact on income. When a subsidiary is selling an additional shares of the common stock to a non-affiliate at a price which exceeds the previous book value per share it will raise the net book value of all shareholders; thus causing an increase in the total subsidiary stockholder's equity against which there is a claim of controlling interest
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A subsidiary sells additional shares of its common stock to a
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