Webb Company Owns 90% of Jones Company Assume Jones Issues 20,000 New Shares of Its Common Stock

Multiple Choice

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2013 are as follows: $\begin{array}{lr}\text { Jones Company: } & \\\text { Shares outstanding } & 100,000 \\\text { Book value of Jones } & \$ 1,200,000 \\\text { Book value per share } & \$ 12 \\\text { Webb Company: } & \\\text { Shares owned of Jones } &90,000 \\\text { Book value of investment } & \$ 1,080,000\end{array}$ Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones. After acquiring the additional shares, what adjustment is needed for Webb's investment in Jones account?

A) $270,000 increase.
B) $270,000 decrease.
C) $27,000 increase.
D) $27,000 decrease.
E) No adjustment is necessary.