On July 1, 2017, Dynamic Company purchased for cash 40 percent of the outstanding capital stock of Cart Company Both Dynamic and Cart have a December 31 yearend Cart, whose common stock is actively traded in the overthecounter market, reported its total net income for the year to Dynamic and also p...

a If any company holding shares of any other company in between 20 but up to 50 percent such stockho ...

On July 1, 2017, Dynamic Company purchased for cash 40 percent of the outstanding capital stock of

Question:

On July 1, 2017, Dynamic Company purchased for cash 40 percent of the outstanding capital stock of Cart Company. Both Dynamic and Cart have a December 31 year‐end. Cart, whose is actively traded in the over‐the‐counter market, reported its total net income for the year to Dynamic and also paid cash dividends on November 15, 2017, to Dynamic and its other stockholders.
Required:
a. How should Dynamic report the foregoing facts in its December 31, 2017, and its income statement for the year then ended? Discuss the rationale for your answer.
b. If Dynamic should elect to report its investment at fair value, how would its and income statement differ from your answer to part (a)?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...