Neill Company purchases 80 percent of the common stock of Stamford Company

On January 1, 2021, Stamford reacquires 8,000 of the outstanding shares of its own common stock for $24 per share. None of these shares belonged to Neill. How does this transaction affect the parent company’s Additional Paid-In Capital account?
a. Has no effect on it.
b. Decreases it by $55,000.
c. Decreases it by $35,000.
d. Decreases it by $28,000.

Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2020, when Stamford has the following stockholders’ equity accounts:

On January 1, 2021, Stamford reports retained earnings of $620,000. Neill has accrued the increase in Stamford’s retained earnings through application of the equity method. View the following problems as independent situations.