Problem:
Rosie Corporation has 70% of the outstanding voting stock of Smith Corporation and 10% of the voting stock of Tommy Corporation. Smith also just spent $10,000 to acquire 20% of Tommy's voting stock. Smith has issued irrevocable letters of credit to guarantee Tommy's notes payable. In the current year, Tommy lost $100,000.
Required:
Question 1: How should the parties report the above arrangements in its consolidated financial statements?
Note: Please provide full description.