On January 1, 2017, Gillettey Company purchases an investment in Buffalo, Inc., a company whose stock trades over the counter, for $2,700,000, representing 20% of the book value of Buffalo. During the year, Buffalo reports a net income of $942,000 and pays cash dividends of $294,000. The fair value of Buffalo's stock on December 31, 2017, is $15,000,000. Gillettey has a calendar year-end.
a. What amount does Gillettey report on its 2017 balance sheet for its investment in Buffalo, if 20% ownership does not imply any significant influence over Buffalo?
b. What amount does Gillettey report on its 2017 balance sheet for its investment in Buffalo, if 20% ownership implies significant influence over Buffalo?

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The Answer of On January 1, 2017, Gillettey Company purchases an investment in Buffalo, Inc., a company whose stock trades over the counter, for $2,700,000, representing 20% of the book value of Buffalo. During the year, Buffalo reports a net income of $942,000 and pays cash dividends of $294,000. The fair value of Buffalo's stock on December 31, 2017, is $15,000,000. Gillettey has a calendar year-end.
a. What amount does Gillettey report on its 2017 balance sheet for its investment in Buffalo, if 20% ownership does not imply any significant influence over Buffalo?
b. What amount does Gillettey report on its 2017 balance sheet for its investment in Buffalo, if 20% ownership implies significant influence over Buffalo?

On January 1, 2017, Gillettey Company Purchases an Investment in Buffalo