(Answered) Question - coffee corp purchased 40 of the outstanding

Accounting

Question - Coffee Corp. purchased 40% of the outstanding shares of Cream Corp. for $2,000,000. The investment allows Coffee to exert significant influence over the operations of Cream. During 2011 Cream recognized net income of $1,500,000 and paid $400,000 in dividends. Discuss how coffee should account for its investment in Cream and how the information would appear in Coffee's balance sheet, income statement, and cash flow statement.

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