Kilo Corporation (the Company), a privately owned entity, has been a long-time client of your firm. You are an audit manager assigned to this engagement for the year ended December 31, 2023. Although the Kilo audit is normally a very "clean" audit, the 2023 audit has been complicated by the Company's acquisition, effective January 1, 2023, of forty percent of the outstanding stock of Romeo Corporation (Romeo), which is also a privately owned business. You have never worked with the equity method of accounting, and you are carefully reviewing the Company's accounting and disclosures related to the CFO's accounting for its investment in Romeo Corporation.

Selected information related to the Company and Romeo follows.