Thomas Inc. purchased 90% of Tracy Co. for $990,000 when the book value of Tracy was $1,000,000. Tracy currently has 100,000 shares outstanding and a book value of $1,200,000.

Tracy sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share.

What adjustment is needed for Thomas' investment in Tracy account?

$180,000 increase.

$180,000 decrease.

$45,000 decrease.

$45,000 increase.

No adjustment is necessary.