Item $7$

On January $1,2024,$ Halpert Incorporated acquired $30\%$ of Schrute Corporation. Halpert used the equity method to account for the investment. On January $1,2025,$ Halpert sold two$-$thirds of its investment in Schrute. It no longer had the ability to exercise significant influence over the operations of Schrute. How should Halpert account for this change?

Multiple Choice

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

Halpert 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 $2024.$

Halpert has the option of using either the equity method or the fair$-$value method for $2024$ and future years.

Halpert should report the effect of the change from the equity to the fair$-$value method as a retrospective change in accounting principle.

Halpert should use the fair$-$value method for $2025$ and future years, but should not make a retrospective adjustment to the investment account.