Question

DeMilo, Inc., owns 100 percent of the 44,000 outstanding shares of Ricardo, Inc. DeMilo currently carries...

DeMilo, Inc., owns 100 percent of the 44,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo account at $505,600 using the equity method.

Ricardo issues 6,000 new shares to the public for $15.25 per share. How does this transaction affect the Investment in Ricardo account that appears on DeMilo’s financial records?

Investment in Ricardo should be (decreased/increased) by _____

Homework Answers

Answer #1

Investment in Ricardo Inc by DeMilo Inc = $505,600
Parent’s Ownership Interest = 100%
Fair Value Ownership Equivalency = $505,600

Adjusted Subsidiary Fair Value after New Share Issue = $505,600 + (6,000 * $15.25)
                                                                                       = $505,600 + $91,500
                                                                                        = $597,100

Partner’s Ownership after New Share Issue = 44,000 / 50,000 = 88%

Value of DeMilo Inc. Share after New Share Issue = $597,100 * 88%
                                                                                  = $525,448

Investment in Ricardo should be increased by $19,848 ($525,448 - $505,600).

Therefore, Investment in Ricardo should be increased by $19,848

I hope it is useful to u if u have any doubt pls comment give me up thumb

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
DeMilo, Inc., owns 100 percent of the 48,000 outstanding shares of Ricardo, Inc. DeMilo currently carries...
DeMilo, Inc., owns 100 percent of the 48,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo account at $517,900 using the equity method. Ricardo issues 2,000 new shares to the public for $14.25 per share. How does this transaction affect the Investment in Ricardo account that appears on DeMilo’s financial records? Investment in Ricardo should be increased by _______
You currently own 8 percent of the 200,000 shares of outstanding stock in Jones, Inc. The...
You currently own 8 percent of the 200,000 shares of outstanding stock in Jones, Inc. The firm has announced it is offering an additional 40,000 shares to the public. What will your new ownership position be if you opt to not participate in the additional stock offering? Assume the issue is fully subscribed. 6.67 percent
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,649,200 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,100,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $246,000. On January 1, 2018, Palka acquired an additional...
Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability...
Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2018, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2017, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20...
On January 1, 2013, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona...
On January 1, 2013, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $774,000 cash. At January 1, 2013, Sedona’s net assets had a total carrying amount of $510,000. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $142,400. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $1,100,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2011, Hamilton sold $1,200,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 7...
B. On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of...
B. On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $626,000 cash. At January 1, 2019, Sedona’s net assets had a total carrying amount of $438,200. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $86,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for...
Air Taxi, Inc. currently has 576,000 shares of stock outstanding that sell for $97 per share....
Air Taxi, Inc. currently has 576,000 shares of stock outstanding that sell for $97 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: BTC has a three for one stock split? BTC has a 18 percent stock dividend? BTC has a 51.6 percent stock dividend? BTC has a three-for-six reverse stock split? Determine the new number of shares outstanding in parts (1) through (4).
Browning Inc. is a small start-up software development firm. It currently owns computer equipment worth $30,000;...
Browning Inc. is a small start-up software development firm. It currently owns computer equipment worth $30,000; has cash on hand of $75,000 contributed by Browning’s owners. For the transaction below, identify the real and/or financial assets that trade hands. Browning sells the $1,000 shares of FaceBook stock at $210/share and uses part of the proceeds to pay off the bank loan.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT