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    Initial Value of Investment in Subsidiary Account

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    The fair value of Carnes' Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2000, Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes' common stock.

    On May 1, 2000, what value is assigned to the investment account?

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    Because the purchase method of accounting records the acquisition of a subsidiary at its fair ...

    Solution Summary

    This solution illustrates what value to use to initially record the purchase of a subsidiary.