Dodge, Incorporated acquires 15% of Gates Corporation on Jan…
Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2020, for $105,000 when the book value of Gates was $600,000. During 2020 Gates reported net income of $150,000 and declared and paid dividends of $50,000. On January 1, 2021, Dodge purchased an additional 25% of Gates for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2020 but Dodge has deemed it necessary to change to the equity method after the second purchase. During 2021 Gates reported net income of $200,000 and reported dividends of $75,000. Which adjustment would be made to change from the fair-value method to the equity method?
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