5. [Comparison of cost and equity methods; CFA adapted] Buny acquired 19% of Bowman for $10 million on January 1. 2000. Bowman's securities are not publicly traded. On January 1, 2001, Burry purchased an additional 1% share in Bowman for $500,000. For the years ended December 31, 2000, and December 31, 2001, Bowman reported earnings and paid dividends as follows: Net Income (Loss) Dividends Paid 2000 2001 $ (600.000) 2,000,000 $800,000 1.000.000

a. Calculate the effect of these investments on Potter's reported sales, net income, and cash flow for each of the years 2001 and 2002.

b. Calculate the carrying amount of Potter's investment in San Francisco as of December 31, 2001, and December 31, 2002

c. Briefly discuss how Potter would account for its investment in San Francisco during 2003. State the additional informa- tion needed to calculate the effect on Potter's 2003 financial statements.

a. Under a strict reading of U.S. GAAP, state which method Burry should use to account for its investment in Bowman in 2000 and in 2001