Webb Company Owns 90% of Jones Company Jones Sells 20,000 Shares of Previously Unissued Shares of Its

question 44

Multiple Choice

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011, are as follows: $\begin{array}{l}\text { Jones Company: }\\\begin{array}{lr}\text { Shares outstanding } & 100,000 \\\text { Book value of Jones } & \$ 1,200,000 \\\text { Book value per share } & \$ 12\end{array}\\\text { Webb Company: }\\\begin{array}{lr}\text { Shares owned of Jones } & 90,000 \\\text { Book value of investment } & \$ 1,080,000\end{array}\end{array}$ 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) $30,000 increase.
• D) $30,000 decrease.
• E) No adjustment is necessary.

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