Mars, Inc. follows IFRS for its external financial reporting. On January 1, 2015, Mars, Inc. purchased 25% of the outstanding stock of Jerome Company (which uses U.S. GAAP for its external financial reporting) for $790,000, and appropriately uses the equity method to account for its investment. Jerome Company reports the following activity for the year ended December 31, 2015:Net loss $60,000Dividends declared and paid 20,000Jerome Company uses the completed-contract method for revenue recognition related to its long-term construction contracts, while Mars, Inc. uses the percentage-of-completion method. Mars, Inc. determines that if Jerome Company had used the percentage-of-completion method, its income would have been $100,000 higher during 2015. What is the balance in the Investment in Jerome Company that will be reported on Mars, Inc.'s balance sheet at December 31, 2015?
A) $825,000
B) $770,000
C) $790,000
D) $785,000

Question

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The Answer of Mars, Inc. follows IFRS for its external financial reporting. On January 1, 2015, Mars, Inc. purchased 25% of the outstanding stock of Jerome Company (which uses U.S. GAAP for its external financial reporting) for $790,000, and appropriately uses the equity method to account for its investment. Jerome Company reports the following activity for the year ended December 31, 2015:Net loss $60,000Dividends declared and paid 20,000Jerome Company uses the completed-contract method for revenue recognition related to its long-term construction contracts, while Mars, Inc. uses the percentage-of-completion method. Mars, Inc. determines that if Jerome Company had used the percentage-of-completion method, its income would have been $100,000 higher during 2015. What is the balance in the Investment in Jerome Company that will be reported on Mars, Inc.'s balance sheet at December 31, 2015?
A) $825,000
B) $770,000
C) $790,000
D) $785,000

Mars, Inc Follows IFRS for Its External Financial Reporting