On january 1 2009 dermot company purchased 15 of the voting, Ask an Expert

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On January 1, 2009, Dermot Company purchased 15% of the voting common stock of Horne Corp. On January 1, 2011, 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?

A. It must use the equity method for 2011 but should make no changes in its financial statements for 2010 and 2009.

B. It should prepare consolidated financial statements for 2011.

C. It must restate the financial statements for 2010 and 2009 as if the equity method had been used for those two years.

D. It should record a prior period adjustment at the beginning of 2011 but should not restate the financial statements for 2010 and 2009.

E. It must restate the financial statements for 2010 as if the equity method had been used then.

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Category:- Accounting Basics
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