Renfroe, Inc. acquires 10% of Stanley Corporation on January 1, 2012, for $90,000 when the book value of Stanley was $1,000,000. During 2012, Stanley reported net income of $215,000 and paid dividends of $50,000. On January 1, 2013, 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 2013, Renfroe 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, 2013?

Question

Quizplus · Accepted Answer

($215,000 × 10%) - ($50,000 × 10%) = $16,500 Debit to the Investment Account