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How should company f report the above facts on december

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Reference no: EM132940750

You are an intern in a CPA firm. Your manager walks into your cubicle and says, "One of our clients is thinking about investing in a company. He wants to know how he should account for this investment. Be prepared to discuss it with the client tomorrow."
Write a memo to your manager giving your thoughts on how this should be handled by the client.

The situation is the following:

  • Company F purchased 40% of the outstanding stock of company K on June 30, 20XX.
  • Both of the companies have a December 31st, year end.
  • Company K is a publicly traded company and reports its net income to company F.
  • Company K also pays a hefty dividend to the shareholders of company F.

Problem 1: How should company F report the above facts on its December 31, 20XX balance sheet and income statement?

Reference no: EM132940750

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