Consequences of Investment Reporting Choices Assume The Coca-Cola Company acquires all of the stock of Bubbly Bottler on January 1, 2016, at a cost of $950 million in cash. Bubblys balance sheet on that date is as follows (in millions):

Tangible assets . . . . . . . . . . .$1,000

Liabilities. . . . . . . . . . . . . . . . .$ 900

Equity. . . . . . . . . . . . . . . . . . .$100

Total assets . . . . . . . . . . . . . .$1,000

Total liabilities and equity. . . .$1,000

Bubblys tangible assets and liabilities are reported at amounts approximating fair value, and the excess paid over book value is attributed entirely to goodwill.

Required

c.Assume Coca-Colas balance sheet just prior to the acquisition consists of $80,000 million in assets and $20,000 million in liabilities. Calculate Coca-Colas leverage, measured as total liabilities divided by total assets, if Coca-Cola reports its investment in Bubbly as a significant influence investment and as a merger.

d.Which reporting choice allows Coca-Cola to appear more financially viable? As Coca-Colas auditor, how do you evaluate Coca-Colas reporting choice?