It must restate the financial statements for 2020 as if the equity method had been used then. On January 1, 2019, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2021, Dermot purchased 28% of Home's voting common stock. If Dermot achieves significant influence with this new investment, how must Dermot account for the change to the equity method? Multiple Choice It must use the equity method for 2021 but should make no changes in its financial statements for 2020 and 2019. It should prepare consolidated financial statements for 2021. It must restate the financial statements for 2020 and 2019 as if the equity method had been used for those two years. It should record a prior period adjustment at the beginning of 2021 but should not restate the financial statements for 2020 and 2019.
It must restate the financial statements for 2020 as if the equity method had been used then. On January 1, 2019, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2021, Dermot purchased 28% of Home's voting common stock. If Dermot achieves significant influence with this new investment, how must Dermot account for the change to the equity method? Multiple Choice It must use the equity method for 2021 but should make no changes in its financial statements for 2020 and 2019. It should prepare consolidated financial statements for 2021. It must restate the financial statements for 2020 and 2019 as if the equity method had been used for those two years. It should record a prior period adjustment at the beginning of 2021 but should not restate the financial statements for 2020 and 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:It must restate the financial statements for 2020 as if the equity method had been used then.
Transcribed Image Text:On January 1, 2019, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2021, Dermot purchased 28%
of Home's voting common stock. If Dermot achieves significant influence with this new investment, how must Dermot account for the change
to the equity method?
Multiple Choice
It must use the equity method for 2021 but should make no changes in its financial statements for 2020 and 2019.
It should prepare consolidated financial statements for 2021.
It must restate the financial statements for 2020 and 2019 as if the equity method had been used for those two years.
It should record a prior period adjustment at the beginning of 2021 but should not restate the financial statements for 2020 and
2019.
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