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How Nixon should report its investment in P?

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1) Nixon owns 45% of P. Only 70% of the outstanding shares are voted at the annual meetings of P. Because of this, Nixon casts a majority of the votes on every ballot when it votes the shares it holds.

2) Nixon holds convertible bonds issued by P. If Nixon converts them, it would result in the ownership of 51% of the outstanding shares of P.

3) Nixon owns 100% of P which is insolvent. All of its assets have been seized by a licensed trustee in backruptcy.

4) Nixon owns 75% of P. A bank seized a portion of P's inventory when P defaulted on a loan.

How Nixon should report its investment in P?

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Solution Summary

This solution answers questions regarding investments, bonds and shares. An overview of four situations are given. The explanation is given in 154 words.

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Situation 1
Nixon has a SIGNIFICANT influence, hence the investment should be reported as an equity investment which is reported as cost adjusted for dividends and the proportionate share of investee company ...

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