Question
On January 1, 2018, Company A paid $150,000 for 15,000 shares of Company B Company at $10 per share. This purchase gave Company A 15%
On January 1, 2018, Company A paid $150,000 for 15,000 shares of Company B Company at $10 per share. This purchase gave Company A 15% ownership of Company B. In 2018, Company B reported net income of $180,000 and paid dividends to all shareholders of $50,000. The market value of Company B shares at December 31, 2018 was $12 per share.
On January 1, 2019 Company A purchased an additional 25,000 shares (25%) of Company B. This last purchase gave Company A the ability to apply significant influence over Company B.
What is the prior period adjustment to Retained Earnings that Company A will need to record on January 1, 2019?
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