PLEASE INCLUDE FASB CODIFICATION - FASB XX-XX-XX

Charger Company acquired 90,000 of the 100,000 outstanding common shares of Herbert Company on January 1, 2021. Rivers Company holds 20% of Herbert Companys bonds payable, debt with a maturity date of September 30, 2032. The other 80% of Herbert Companys bonds payable are owned by various companies and individuals (not Charger Co.). Charger Companys fiscal year-end is December 31, and Herbert Companys fiscal year-end is October 31.

1. How should Charger Company recognize Rivers Companys investment in the bonds of Herbert Company in the Consolidated financial statements? Charger should:

a. Include Rivers Companys interest in Herbert Companys debt as Noncontrolling Interest in the consolidated balance sheet.

b. Exclude Rivers Companys interest in Herbert Companys debt as Noncontrolling Interest in the consolidated balance sheet because this does not represent ownership rights in the subsidiary.