Question
On January 1, 2011, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2013, Dermot purchased 28% of Horne's
On January 1, 2011, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2013, Dermot purchased 28% of Horne's voting common stock. If Dermot achieves significant influence with this new investment, how must Dermot account for the change to the equity method?
It must restate the financial statements for 2012 as if the equity method had been used then.
It must use the equity method for 2013 but should make no changes in its financial statements for 2012 and 2011.
It should prepare consolidated financial statements for 2013.
It should record a prior period adjustment at the beginning of 2013 but should not restate the financial statements for 2012 and 2011.
It must restate the financial statements for 2012 and 2011 as if the equity method had been used for those two years.
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