Webb Company Purchased 90% of Jones Company for $990,000 When

question 7

Multiple Choice

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. Jones currently has 100,000 shares outstanding and a book value of $1,200,000.Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share.What adjustment is needed for Webb's investment in Jones account?

• A) $180,000 increase.
• B) $180,000 decrease.
• C) $45,000 decrease.
• D) $45,000 increase.
• E) No adjustment is necessary.

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Definitions:

EIC

Earned Income Credit, a refundable tax credit for low- to moderate-income working individuals and families.

Tax Refund

The amount of money returned to a taxpayer when the amount of taxes paid exceeds the actual tax liability.

Child and Dependent Care Credit

A tax credit offered to taxpayers to offset the cost of care for qualifying dependents to enable employment.

Full-time Student

A status designated for individuals enrolled in an educational institution taking a full load of courses as defined by the institution.