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Toillustratethisredesignprocess,assumethatDueCompanyacquiresa60percentstake

inSmallCompanyonJanuary10,2004.OfficialsofDuedonottrustthattheircompany
hastheabilitytoexertsignificantpressureoverFue.Dueproperlyreportstheinvestment
byusingtheLCMasanavailableforsalesecurity.Subsequently,onJanuary1,2006,
Duebuysananother10percentofRuesoutstandingvotingstock,soastoproperly
influencetheinvesteesdecisionmaking.From2004to2006,Smallreportsnetincome,
declaresandpayscashdividends,andhasfairvaluesatJanuary1ofeachyearasfollows.

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