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Why the investment is shown as a single line

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Reference no: EM132638947

Question - Richardson Coasters is an amusement ride manufacturing company, which was bailed out of near bankruptcy by Galaxy Amusement Parks. Galaxy contributed a part of its rollercoaster development segment plus $10 million of cash in exchange for approximately 25 percent interest in Richardson, with the promise to incorporate a majority of the newly developed rollercoasters into its 58 parks around the area. Galaxy also plans to take an active interest in oversight of Richardson's manufacturing in order to furnish its parks with rides that adhere to its common themes. You are the controller for Galaxy and your investor Relations Office is asking about why the investment is shown as a single line on the financial statements. Explain why the accounting treatment is required and the positives and negatives of this method.

Reference no: EM132638947

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