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Thomas Inc. purchased 90% of Tracy Co. for $990,000 when the book value of Tracy...

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Accounting

Thomas Inc. purchased 90% of Tracy Co. for $990,000 when the book value of Tracy was $1,000,000. There was no premium paid by Thomas. Tracy currently has 100,000 shares outstanding and a book value of $1,200,000. Assume Tracy issues 20,000 new shares of its common stock to outside parties for $15 per share. After acquiring the additional shares, what adjustment is needed for Thomas' investment in Tracy account?

$270,000 increase.

$270,000 decrease.

$30,000 increase.

$30,000 decrease.

No adjustment is necessary.

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