The Crump Companies, Inc. has ownership interests in several public companies. At the beginning of 2021, the company’s ownership interest in the common stock of Silken Properties increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment in equity securities account was $31 million at the time of the change. Accountants working with company records determined that the balance in an investment in equity affiliate account would have been $48 million if the equity method had been used previously.Required:1. Will Crump apply the new method retrospectively or apply the new method prospectively?2. Suppose Crump is changing from the equity method rather than to the equity method. Will Crump apply the new method retrospectively or prospectively?
The Crump Companies, Inc. has ownership interests in several public companies. At the beginning of 2021, the company’s ownership interest in the common stock of Silken Properties increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment in equity securities account was $31 million at the time of the change. Accountants working with company records determined that the balance in an investment in equity affiliate account would have been $48 million if the equity method had been used previously.
Required:
1. Will Crump apply the new method retrospectively or apply the new method prospectively?
2. Suppose Crump is changing from the equity method rather than to the equity method. Will Crump apply the new method retrospectively or prospectively?
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