Subsidiary book value of stockholders equity

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Composition of equity investment account

Several years ago, a parent company acquired all of the outstanding common stock of its subsidiary for a purchase price of $275,000. On the acquisition date, this purchase price was $68,000 more than the subsidiary’s book value of Stockholders’ Equity. The AAP was entirely attributable to Goodwill. On the date of acquisition, the parent company management believes that the goodwill only has a 10-year useful life. Since the date of acquisition, the subsidiary has reported cumulative net income of $234,000 and paid $97,000 of dividends to its parent company.

Compute the balance of the Equity Investment account on the parent’s balance sheet assuming that the Goodwill asset has not declined in value subsequent to the date of acquisition.

Reference no: EM131356753

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