a. Jill should continue to use the equity method to maintain consistency in its

Question

a. Jill should continue to use the equity method to maintain consistency in its financial statements.

b.Jill should restate the prior years' financial statements and change the balance in the investment account as if the fair value method had been used since 20x1.

c.Jill has the option of using either the equity method or the fair value method for 20x1 and future years.
d.Jill should report the effect of the change from the equity to the fair value method as a retrospective change in accounting principle.
e. Jill should use the fair value method for 20x2 and future years but should not make a retrospective adjustment to the investment account.

2. (TCO 1) On January 1, 20x1, Jill Inc. acquired 30% of Noll Corp. Jill used the equity method to account for the investment. On January 1, 20x2, Jill sold two thirds of its investment in Noll. It no longer had the ability to exercise significant influence over the operations of Noll. How should Jill have accounted for this change? (Points : 5)

Explanation / Answer

Answer is d i.e. should chage effect retrospective effect in financial statements

d.Jill should report the effect of the change from the equity to the fair value method as a retrospective change in accounting principle.

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