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    Accounting Effect of Change in Ownership

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    Sisk Company has owned 10 percent of Maust, Inc., for the past several years. This ownership did not allow Sisk to have significant influence over Maust. Recently, Sisk acquires an additional 30 percent of Maust and now has this ability. How will this change be reported by the investor?
    A. A cumulative effect of an accounting change is shown in the current income statement.
    B. No change is recorded; the equity method is used from the date of the new acquisition.
    C. A retroactive adjustment is made to restate all prior years to the equity method.
    D. Sisk has the option of choosing the method to be used to show this change.

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    Solution Preview

    Answer: ( C) A retroactive adjustment is made to restate all prior years to the equity method.

    Explanation: Where investor's percentage of ...

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