Renfroe, Inc. acquired 10% of Stanley Corporation on January 1, 2017, for $90,000 when the book value of Stanley was $1,000,000. During 2017, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10% investment was the same as the fair value of that investment when, on January 1, 2018, Renfroe purchased an additional 30% of Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2018, Renfroe reported net income of $320,000 and paid dividends of $50,000.How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2018?
A. A debit of $165,000.
B. A debit of $90,000.
C. A debit of $16,500.
D. A debit of $21,500.
E. There is no adjustment.
Answer: E
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