On January 1, Stanton Company buys 10 percent of the outstanding shares of its parent, ProMart, Inc. Although the total book and fair values of ProMart’s net assets equaled $4 million, the price paid for these shares was $420,000. During the year, ProMart reported $510,000 of operating income (no subsidiary income was included) and paid dividends of $140,000. How are the shares of the parent owned by the subsidiary reported at December 31?
a. An investment balance of $457,000 is eliminated for consolidation purposes.
b. Consolidated stockholders’ equity is reduced by $457,000.
c. An investment balance of $437,000 is eliminated for consolidation purposes.
d. Consolidated stockholders’ equity is reduced by $420,000.
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