Alice, Inc., owns 100 percent of Rughty, Inc. On Alices books, the Investment in Rughty account currently

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Alice, Inc., owns 100 percent of Rughty, Inc. On Alice’s books, the Investment in Rughty account currently is shown as $731,000 although the subsidiary’s 40,000 shares have an underlying book value of only $ 12 per share.

Rughty issues 10,000 new shares to the public for $15.75 per share. How does this transaction affect the Investment in Rughty account that appears on Alice’s financial records? LO4

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