Kilo Corporation $($the Company$),$ a privately owned entity, has been a

long$-$time client of your firm. You are an audit manager assigned to this

engagement for the year ended December $31,2023.$ Although the Kilo

audit is normally a very "clean" audit, the $2023$ audit has been

complicated by the Company's acquisition, effective January $1,2023,$ of

forty percent of the outstanding stock of Romeo Corporation $($Romeo$),$

which is also a privately owned business. You have never worked with

the equity method of accounting, and you are carefully reviewing the

Company's accounting and disclosures related to the CFO's accounting

for its investment in Romeo Corporation.

Selected information related to the Company and Romeo follows.