Answered

Get reliable answers to your questions at Westonci.ca, where our knowledgeable community is always ready to help. Ask your questions and receive accurate answers from professionals with extensive experience in various fields on our platform. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

Several years ago, a parent company acquired all of the outstanding common stock of its subsidiary for a purchase price of $400,000. On the acquisition date, this purchase price was $100,000 more than the subsidiary's book value of Stockholders' Equity. The AAP was entirely attributable to Goodwill. Since the date of acquisition, the subsidiary has reported cumulative net income of $400,000 and paid $50,000 of dividends to its parent company. Compute the balance of the Equity Investment account on the parent's pre-consolidation balance sheet assuming that the Goodwill asset has not declined in value subsequent to the date of acquisition.

Sagot :

abiolataiwo2015

Answer:

$750,000

Explanation:

Computation of the balance of the Equity Investment account on the parent's pre-consolidation balance sheet

EQUITY INVESTMENT ACCOUNT

Purchase price $400,000

Add Net income $400,000

Less Dividends ( $50,000 )

Balance of equity $750,000

($400,000+$400,000-$50,000)

Therefore the balance of the Equity Investment account on the parent's pre-consolidation balance sheet assuming that the Goodwill asset has not declined in value subsequent to the date of acquisition will be $750,000

Thanks for stopping by. We strive to provide the best answers for all your questions. See you again soon. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.