Ritva Co Purchased a 38% Interest in Saron Ltd on October

question 29

Essay

Ritva Co purchased a 38% interest in Saron Ltd on October 1,20X9 for $765,000.The management of Ritva is now preparing the first set of financial statements since the acquisition and is unsure of how to report the investment.
a.If Ritva is a publicly traded company following IFRS,can the investment be reported on an equity basis? On the cost basis? At fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes? What would be the impact on net earnings under each method? What is the impact on the investment account under each method?
b.If Ritva is a privately held corporation following ASPE,can the investment be reported on an equity basis? Or on the cost basis? Or at fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes?

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Definitions:

SNCC

The Student Nonviolent Coordinating Committee, a key organization in the American civil rights movement of the 1960s, known for its youth-led activism, sit-ins, and freedom rides.

COFO-led

Led by the Council of Federated Organizations, a coalition of major civil rights groups in Mississippi during the 1960s.

Freedom Summer

A volunteer campaign in the United States launched in June 1964 to attempt to register as many African American voters as possible in Mississippi.

Militant

Characterized by a vigorous and sometimes aggressive activism in support of a political or social cause.