On January 2, 2018, LVMH, Inc. acquired Tiffany as a wholly-owned subsidiary, paying $1,341,500. The purchase price was $800,000 in excess of the book value of Tiffany’s net assets. Part of the excess was attributable to a building with a 7-year life undervalued by $350,000. The rest was goodwill. On the acquisition date, Tiffany’s reported retained earnings equal to $385,000. LVMH uses the cost method of consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below.

	LVMH, Inc.	Tiffany
Sales revenue	$1,875,000	$781,000
Cost of goods sold	-658,000	-451,000
Gross profit	1,217,000	330,000
Operating expenses	-325,000	-129,000
Dividend income	25,000	0
Net Income	$917,000	$201,000
Retained Earnings, 1/1/20	$2,316,500	$475,500
Net income	917,000	201,000
Dividends	-75,000	-25,000
Retained Earnings, 12/31/20	$3,158,500	$651,500
Cash and receivables	$492,840	$540,200
Inventory	785,000	513,600
Equity investment	1,341,500
Property, plant & equipment (Net)	3,852,000	346,500
Total Assets	$6,471,340	$1,400,300
Accounts payable	$408,000	$157,800
Accrued liabilities	498,340	365,000
Notes payable	478,500	69,500
Common stock	350,000	70,000
Additional paid-in capital	1,578,000	86,500
Retained Earnings, 12/31/20	3,158,500	651,500
Total Liabilities and Equities	$6,471,340	$1,400,300

1. At what amount will the EQUITY INVESTMENT account appear on the consolidated financial statements for 2020?

Answer rating: 100% (QA)

A Calculation of the value of equity investment Particulars Value Cost of investment 1341500 Add Sha... View the full answer