Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2011, when Cocker had the following stockholders’ equity accounts.
Common stock – 40,000 shares outstanding $140,000
Additional paid-in capital 105,000
Retained earnings 476,000
Total stockholders’ equity $721,000
Popper paid $682,000 to acquire its 80% interest in Cocker, which was proportional to Cocker’s total fair value. Popper attributed any excess acquisition-date fair value over Cocker’s book value to goodwill, which since has not suffered any impairment. On January 1, 2014, 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, 2014, Cocker issued 10,000 additional shares of common stock for $21 per share. Popper did not acquire any of this newly issued stock. How would this transaction affect the additional paid-in capital of the parent company?
- Decrease it by $45,060
- Decrease it by $23,240
- Decrease it by $68,250
- Decrease it by $64,720