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What role does the fair value of the investment play

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Sampson Inc. paid 770,000 for a 30 percent investment in the common shares of Semmi Systems Inc. For the first year, iSemmi Systems Inc. reported net income of $365,000 and at year-end declared and paid cash dividends of $120,000. On the balance sheet date, the fair value ofSampson Inc.'s investment in Semmi Systems Inc. shares was $810,000.

Required

Question 1. Which method is appropriate for SampsonSampson Inc. to use in accounting for its investment in SemmiSemmi Systems Inc.? Why?

Question 2. Show everything that SampsonSampson Inc. would report for the investment and any investment revenue in its year-end financial statements.

Question 3. What role does the fair value of the investment play in this situation?

Reference no: EM132497885

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