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.

$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

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20