Webb Company Owns 90% of Jones Company

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:

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.