On January 1, 2020 Poplar Corporation acquired a 45% ownership interest in Shady Lane Company for $575,000. The controller is now preparing his first set of financial statements since the acquisition and is unsure about which method of reporting is most appropriate for the investment. He has come to you for advice.

REQUIRED:

A) State under what conditions it would be appropriate for Poplar to prepare consolidated financial statements to report the investment in Shady Lane. As part of your answer, briefly describe the extent of influence implied by the use of consolidation and state 2 factors that might indicate that this extent of influence does exist.

B) State under what conditions it would be appropriate for Poplar to report the investment in Shady Lane using the equity method. As part of your answer, briefly describe the extent of influence implied by the use of the equity method and state 2 factors that might indicate that this extent of influence does exist.

C) State under what conditions it would be appropriate for Poplar to report the investment in Shady Lane using proportionate consolidation (Proprietary Theory). As part of your answer, identify the extent of influence implied by the use of proportionate consolidation.