On July 1, 2010, Selig Company purchased for cash 40% of the outstanding ordinary shares of Spoor

Question:

On July 1, 2010, Selig Company purchased for cash 40% of the outstanding ordinary shares of Spoor Corporation. Both Selig and Spoor have a December 31 year-end. Spoor Corporation, whose shares are actively traded on the American Stock Exchange, paid a cash on November 15, 2010, to Selig Company and its other shareholders. It also reported its total net income for the year of $920,000 to Selig Company.

Instructions
Prepare a one-page memorandum of instructions on how Selig Company should report the above facts in its December 31, 2010, statement of financial position and its 2010-income statement. In your memo, identify and describe the method of valuation you recommend. Provide rationale where you can. Address your memo to the chief accountant at Selig Company.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...