Renfroe, Inc. acquired 10% of Stanley Corporation on January 4, 2020, for $90,000 when the book value of Stanley was $1,000,000. During 2020, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10% investment was the same as the fair value of that investment when, on January 1, 2021, Renfroe purchased an additional 30% of Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2021, Stanley reported net income of $320,000 and paid dividends of $50,000. How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2021? O There is no adjustment. O A debit of $165,000. O A debit of $90,000 O A debit of $16,500

Renfroe, Inc. acquired 10% of Stanley Corporation on January 4, 2020, for $90,000 when the book value of Stanley was $1,000,000. During 2020, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10% investment was the same as the fair value of that investment when, on January 1, 2021, Renfroe purchased an additional 30% of Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2021, Stanley reported net income of $320,000 and paid dividends of $50,000. How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2021? O There is no adjustment. O A debit of $165,000. O A debit of $90,000 O A debit of $16,500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Renfroe, Inc. acquired 10% of Stanley Corporation on January 4, 2020, for $90,000 when the book value of Stanley was
$1,000,000. During 2020, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10%
investment was the same as the fair value of that investment when, on January 1, 2021, Renfroe purchased an additional 30% of
Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2021, Stanley
reported net income of $320,000 and paid dividends of $50,000.
How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity
method on January 1, 2021?
O There is no adjustment.
O A debit of $165,000.
O A debit of $90,000
O A debit of $16,500

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