DeMilo, Inc., owns 100 percent of the 40,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo’s account at…

DeMilo, Inc., owns 100 percent of the 40,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo’s account at $490,000 using the equity method.

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

The investment in Ricardo should be increased by how much?

Thanks in advance for the help!!

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