Another investment of Sound is its 4 5 % interest in Pits Mining Corporation ( Pits )
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Question:
Another investment of Sound is its interest in Pits Mining Corporation Pits This investment was
the outcome of a takeover attempt by Sound two years ago. Sound was frustrated in its attempt by a
coalition of other companies in the extraction industry, which effectively blocked Sounds bid for
control. Sound was left with the interest that it had managed to acquire. Although Sounds block of
Pits shares is by far the largest single block, Sound has not been able to gain representation on the Pits
board of directors. Sound has instituted court action against Pits to force the other shareholders to
admit Sound nominees to the board
Discuss the manner in which Sound should account for this investment when issuing its annual
financial statements. Specify what additional information you would like to have, if any. Recommend an
accounting approach for this investment, stating any assumptions that you made in arriving at your
recommendations.
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
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