Multi- Corporation has been following a growth and diversification strategy for the past two years. To accomplish this goal, it has been making a series of strategic investments. This growth has been financed through the bank and private investors. Next year, the company is going to issue shares to the public.
You have just finished a meeting with Catherine, the controller of Multi- Corporation. She has asked you to provide recommendations on how to report the following investments that were made in 20X6.
1. Multi- Corporation purchased all of the 100,000 outstanding B shares of Suds Limited. Each share has one vote. The previous owner of the B shares, Megan, retained all of the 80,000 outstanding A shares of Suds Limited. Each share also has one vote. To avoid sud-den changes to the business, Megan stipulated in the sales agreement that she was to retain the right to refuse the appointment of management for Suds Limited and to approve any significant transactions of Suds Limited.
2. Multi- Corporation owns 37% of the voting common shares of Berry Corporation. The remaining 63% of the shares are held by members of the family of the company founder.
To date, the family has elected all members of the board of directors, and Multi- Corporation has not been able to obtain a seat on the board. Multi- Corporation is hoping eventually to buy a block of shares from an elderly family member and eventually own 60% of the shares.
Provide a report to Catherine outlining the appropriate method of accounting for these investments.