Business, 13.04.2021 02:20 savvaggeb

Jones, Incorporated acquires 15% of Anderson Corporation on January 1, 2020, for $105,000 when the book value of Anderson was $600,000. During 2020 Anderson reported net income of $150,000 and paid dividends of $50,000. On January 1, 2021, Jones purchased an additional 25% of Anderson for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2020 but Jones has deemed it necessary to change to the equity method after the second purchase. During 2021 Anderson reported net income of $200,000, and reported dividends of $75,000. Which of the following is true regarding the change from the fair-value method to the equity method?
a. Jones must record a debit to additional pald-in capital for $15,000
b. Jones must record a debit to additional paid in capital for $200,000
c. Jones must record a debit of $200,000 to the investment in Anderson Account
d. Jones must retrospectively apply the equity method to interests reported under the fair-value method
e. Jones must record a credit of $15,000 to the Investment in Anderson Account

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Jones, Incorporated acquires 15% of Anderson Corporation on January 1, 2020, for $105,000 when the b...

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