Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2013 are as follows: Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per share.
When Ryan's new percent ownership is rounded to a whole number, what adjustment is needed for Ryan's investment in Chase account?
A) $16,000 decrease.
B) $60,000 decrease.
C) $64,000 increase.
D) $64,000 decrease.
E) No adjustment is necessary.

Question

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2013 are as follows:  Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per share.
When Ryan's new percent ownership is rounded to a whole number, what adjustment is needed for Ryan's investment in Chase account?
A) $16,000 decrease. 
B) $60,000 decrease. 
C) $64,000 increase. 
D) $64,000 decrease. 
E) No adjustment is necessary.

Quizplus · Accepted Answer

$400,000 × .80 = $320,000 - $304,000 ($320,000 × .95) = $16,000 Decrease in Investment Account

Ryan Company Owns 80% of Chase Company