Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 25

On January 1, a subsidiary buys 10 percent of the outstanding shares of its parent company.Although the total book value and fair value of the parent's net assets were $4 million, the price paid for these shares was $420,000.An intangible asset is amortized in this business combination over a 40-year period.During the year, the parent reported $510,000 of operational income (no investment income was included) and paid dividends of $140,000.How are these shares reported at December 31 a.The investment is recorded as $457,000 and then eliminated for consolidation purposes.
B)Consolidated stockholders' equity is reduced by $457,000.
C)The investment is recorded as $456,500 and then eliminated for consolidation purposes.
D)Consolidated stockholders' equity is reduced by $420,000.