Question

Required information These questions are based on the following information and should be viewed as independent situations. Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2016, when Cocker had the following stockholders' equity accounts. $ Common stock - 40,000 shares outstanding Additional paid-in capital Retained earnings Total stockholders' equity 140,000 105,000 476,000 721,000 $ To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2019. Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2019, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share. None of these shares belonged to Popper. How would this transaction have affected the additional paid-in capital of the parent company?

Answer 1

Calculation:

It is given that company has issued 8,000 additional shares $34 per share. When the share is bought back with the same issue price, there will be no additional amount on issue.

Therefore, there will be no effect on the additional paid in capital of the parent company.

Therefore, Option $0 is correct.