Cru Manufacturing (CruMan) buys some of its critical manufacturing raw materials from Sader Industries. To gain influence, CruMan executed the following transactions:
· January 1, 2014: Purchased 10% of Sader’s outstanding stock ·
July 1, 2015: Increased ownership share to 25% of Sader’s outstanding stock
· January 1, 2016: Increased ownership to 80% of Sader’s outstanding stock CruMan is a calendar year company.
Describe the financial reporting methodologies used by CruMan at the end of each year 2014, 2015, and 2016. Briefly describe the important philosophical underpinnings of each method. Note that CruMan purchased the 2015 stock midyear. In your answer, indicate the impact of a midyear acquisition on CruMan's financial reporting of its ownership increase. (Note: Intra-entity transactions need not be covered in your answer. The second question covers intra-entity.)