Primary Task Response: Within the Discussion Board area, write 500–650 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.
You work 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.
- How should company F report the above facts on its December 31, 20XX balance sheet and income statement?
- Support your answer.